What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-06-01 compared with 2020-06-01 · 1252 added, 648 removed, 488 unchanged (80% of the section changed)

4 unchanged sentences

Lakewood, Colorado

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Mesa Laboratories, Inc.

(the “Company”) as of March 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows for each year in the two-year period ended March 31, 2020;

and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2020 and 2019, and the results of its operations and its cash flows for each year in the two-year period ended March 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of March 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO”) and our report dated June 1, 2020 expressed an adverse opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

(the “Company”) as of March 31, 2021 and 2020, the related consolidated statements of income, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 2021, and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company's internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2021 based on criteria established in the COSO framework.

Basis for Opinions

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combination

Description of the Matter

As disclosed in Note 4 to the financial statements, the Company completed an acquisition of 100% of the outstanding shares of Gyros Protein Technologies Holding AB for total cash consideration of approximately $181.5 million, net of cash acquired, on October 31, 2019.

The Company accounted for the transaction as a business combination by applying the acquisition method of accounting.

Accordingly, the assets acquired and liabilities assumed were recognized at their respective fair values.

Auditing management’s accounting for the business combination was challenging due to the significant judgments and estimation required by management to determine the preliminary fair values of certain intangible assets and inventory.

The significant estimations uncertainty are primarily due to the complexity of the valuation models used to measure the fair value of the intangible assets and the sensitivity of the respective fair value estimates to the significant underlying assumptions.

The significant assumptions used to estimate the preliminary fair values of the customer relationships, trade name, and acquired technology consists of future cash flows and expenses discounted at an estimated weighted average cost of capital, which includes revenue growth rates, customer attrition, and useful lives.

The significant assumption used to estimate the preliminary fair value of the inventory consisted of future sales of the acquired inventory based on comparative sales with customers.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding of the Company’s acquisition process and evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of the acquired assets.

Our audit procedures included, among others, evaluating the appropriateness of Company's valuation methodology, significant assumptions used by the Company, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

We involved our valuation specialists to assist with our evaluation of the selection and application of the valuation methodology used by the Company and certain significant assumptions included in the fair value estimates.

We assessed the estimated future cash flows by obtaining an understanding of the underlying assumptions and compared to historical performance.

We examined the inputs to the weighted average cost of capital assumptions.

We also performed sensitivity analyses of the significant assumptions within the valuation models by varying key assumptions within an observable range.

Effect on financial statements of material weakness in internal control over financial reporting

Description of the Matter

As disclosed in Management’s Annual Report on Internal Control Over Financial Reporting , the Company identified a material weakness related to ineffective information technology general controls ("ITGCs") in the areas of user access and program change management over certain information technology (IT) systems that support the Company’s financial reporting processes.

The Company’s business process controls (both automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.

As a result of the material weakness we were required to increase our audit effort and modified the nature and extent of audit evidence obtained.

How We Addressed the Matter in Our Audit

Significant auditor judgment was required to design and execute the incremental audit procedures related to the IT applications and financial statement account balances affected by the ineffective internal controls and to assess the sufficiency of the procedures performed and evidence obtained.

Auditing the significant financial statement accounts affected by the material weakness in ITGCs was determined to be a critical audit matter because significant auditor judgment and the assistance of IT professionals was required to design and execute the incremental audit procedures related to the IT applications and to assess the sufficiency of the procedures performed and evidence obtained.

We involved our IT professionals to assist us in performing additional audit procedures related to users with access to IT applications, including procedures to assess users with potential segregation of duties conflicts and critical and sensitive access rights.

Furthermore, we evaluated the impact on relevant account balances, taking into account the complexity of the business processes impacted by the user access controls.

This included lowering the testing threshold, increasing the samples for instances related to obtaining external documentation and confirmations, and tailoring the audit procedures for the impacted accounts compared to what we would have performed if the Company’s ITGCs were operating effectively.

/s/ Plante & Moran, PLLC

We have served as the Company’s auditor since 1986.

Denver, Colorado

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Mesa Laboratories, Inc.

Lakewood, Colorado

Opinion on Internal Control Over Financial Reporting

We have audited Mesa Laboratories, Inc.

(the “Company”) internal control over financial reporting as of March 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, because of the material weakness described below on the achievement of objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of March 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Mesa Laboratories, Inc.

and the related notes (collectively referred to as the “financial statements”) and our report dated June 1, 2020, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment:

Deficiencies were identified in the Company’s Information Technology General Controls (ITGCs) that are designed to prevent or detect unauthorized access or changes to certain information technology (IT) systems that support the Company’s financial reporting processes.

There were ineffective ITGCs in the areas of logical access, including critical failures related to user administration, and change management over certain IT systems that support the Company’s financial reporting processes.

As a result, business process automated and manual controls that were dependent on the affected ITGCs were ineffective because they could have been adversely impacted.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 financial statements, and this report does not affect our report dated June 1, 2020, on those financial statements.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded an acquired entity from its assessment of internal control over financial reporting as of March 31, 2020 because it was acquired by the Company in a purchase business combination during 2020.

We have also excluded this entity from our audit of internal control over financial reporting.

The acquired entity represents 45% and 12% of consolidated total assets and revenues, respectively, for the year ended March 31, 2020.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

2 unchanged sentences

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.          

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Taxes —

Refer to Notes 1 and 14 to the financial statements

Critical Audit Matter Description

The Company’s income tax expense includes U.S., state, local and international income taxes.

Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting basis and the tax basis of existing assets and liabilities.

The tax rate used to determine the deferred tax assets and liabilities is based on the enacted tax rate for the year and the manner in which the differences are expected to reverse.

Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

We identified management’s calculation of income tax expense and deferred tax assets and liabilities (net of valuation allowance) as a critical audit matter because of the significant judgments and estimates management makes to determine these amounts.

Performing audit procedures to evaluate the reasonableness of management’s interpretation of tax law in various foreign jurisdictions, and its estimate of the associated provisions and tax charges required a high degree of auditor judgment and increased effort.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures performed to address this critical audit matter included the following, among others:

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over income taxes balances and disclosures, including the provision for income taxes and deferred tax assets and liabilities (including valuation allowance).

We assessed the Company’s income tax expense and deferred tax assets and liabilities by:

Evaluating the Company’s income tax provision calculation, including testing the appropriateness of income tax rates applied and of income allocations among the taxing jurisdictions, and the mathematical accuracy of the calculation.

Evaluating the Company’s analyses supporting its conclusions as to the recognition and measurement of deferred tax assets and liabilities, including the calculation of the deferred tax asset resulting from the carryover of net operating losses.

Evaluating management’s assessment of the Company’s ability to utilize the deferred tax assets in future years.

Evaluating the Company’s disclosures related to the provision for income taxes and deferred tax assets and liabilities (including valuation allowance).

/s/ Plante & Moran, PLLC

Denver, Colorado

Report of Independent Public Accounting Firm

To the Shareholders and Board of Directors of

Mesa Laboratories, Inc.

Lakewood, Colorado

OPINION ON THE FINANCIAL STATEMENTS

We have audited the accompanying consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows of Mesa Laboratories, Inc.

(the “Company”) for the year ended March 31, 2018;

and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the operations of the Company and its cash flows for the year ended March 31, 2018 in accordance with accounting principles generally accepted in the United States of America.

BASIS FOR OPINION

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ EKS&H LLLP

We have served as the Company’s auditor since 1986.

Denver, Colorado

We began serving as the Company's auditor in 1986.

In 2018 we became the predecessor auditor.

Mesa Laboratories, Inc.

3 unchanged sentences

Cash and cash equivalents

$ 263,865  

$ 81,380  

Accounts receivable, less allowances of $218 and $159 , respectively

Inventories, net

Prepaid income taxes

23,787  

21,132  

11,178  

14,230  

Prepaid expenses and other

Prepaid income taxes  

Total current assets

303,749  

122,792  

Property, plant and equipment, net

21,998  

22,066  

Deferred tax asset

Intangibles, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

111,741  

119,871  

160,841  

141,536  

$ 601,475  

$ 409,108  

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

Accounts payable

$ 4,473  

$ 3,408  

Accrued payroll and benefits

Current portion of long-term debt

Unearned revenues

Contingent consideration

Estimated Legal Liabilities

Income taxes payable  

Other accrued expenses

Total current liabilities

32,583  

26,008  

Deferred tax liability

Long-term debt, net of debt issuance costs and current portion

Convertible senior notes, net of discounts and debt issuance costs

16,275  

21,451  

Other long-term liabilities

Convertible senior notes, net of discounts and debt issuance costs

145,675  

140,278  

Total liabilities

Stockholders’ equity:

195,248  

189,095  

Stockholders’

Common stock, no par value;

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issued and outstanding, 5,140,568 and 4,387,140 shares, respectively

317,652  

158,023  

Retained earnings

Accumulated other comprehensive (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

72,459  

72,359  

Accumulated other comprehensive income (loss)

16,116  

Total stockholders’

406,227  

220,013  

Total liabilities and stockholders’

$ 601,475  

$ 409,108  

See accompanying notes to consolidated financial statements.

Mesa Laboratories, Inc.

Consolidated Statements of Operations

Consolidated Statements of Income

(In thousands, except per share data)

Year Ended March 31,

$ 107,028  

$ 93,401  

$ 81,798  

26,909  

24,286  

21,337  

Total revenues

133,937  

117,687  

103,135  

Cost of revenues:

Cost of products

33,120  

40,445  

30,250  

Cost of services

13,803  

11,880  

11,969  

Total cost of revenues

46,923  

52,325  

42,219  

87,014  

65,362  

60,916  

Operating expenses:

18,480  

12,910  

General and administrative

45,697  

37,826  

31,295  

Research and development

10,388  

Impairment of goodwill and long-lived assets

1 unchanged sentence

Total operating expenses

74,656  

57,439  

51,135  

Operating income

Nonoperating expense:

12,358  

Nonoperating expenses:

Interest expense and amortization of debt discount

Interest (income)

Other (income) expense, net

( 107 )  

( 960 )  

Other expense (income), net

( 483 )  

Total nonoperating expense

10,055  

Earnings before income taxes

Income tax expense

Net income (loss)

Earnings (loss) per share:

Income tax (benefit) expense  

( 971 )  

$ 3,274  

$ 1,778  

$ 7,484  

Earnings per share:

$ 0.66  

$ 0.42  

$ 1.95  

Diluted  

$ 0.64  

$ 0.41  

$ 1.86  

Weighted-average common shares outstanding:

*Accumulated other comprehensive (loss) income

See accompanying notes to consolidated financial statements.

Mesa Laboratories, Inc.

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

(In thousands except per share data)

Year Ended March 31,

Net income (loss)

Other comprehensive (loss) income:

Foreign currency translation adjustments, net

Comprehensive (loss) income

$ 3,274  

$ 1,778  

$ 7,484  

Other comprehensive income (loss):

Foreign currency translation adjustments

26,485  

( 8,367 )  

Comprehensive income (loss)

$ 29,759  

$ ( 6,589 )  

$ 5,105  

See accompanying notes to consolidated financial statements.

Mesa Laboratories, Inc.

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Stockholders’

(In thousands, except share amounts)

1 unchanged sentence

Retained Earnings

March 31, 2017

March 31, 2018  

3,801,439  

30,516  

68,281  

99,361  

Exercise of stock options and vesting of restricted stock units

88,699  

Dividends paid, $0.64 per share

Stock-based compensation

( 2,462 )  

Stock-based compensation expense

Foreign currency translation

( 2,379 )  

March 31, 2019

3,890,138  

39,823  

73,303  

( 1,815 )  

111,311  

Exercise of stock options and vesting of restricted stock units

65,752  

Proceeds from issuance of common stock, net of issuance costs of $ 5,568

431,250  

84,995  

Proceeds from conversion feature of convertible senior notes, due 2025, net of allocated costs and deferred taxes of $8,338  

22,735  

Dividends paid, $0.64 per share

Stock-based compensation

( 2,722 )  

Stock-based compensation expense

Currency translation recognized in earnings from the exit of Cold Chain Packaging Division  

( 187 )  

Foreign currency translation

( 8,367 )  

Net income  

March 31, 2020

4,387,140  

158,023  

72,359  

( 10,369 )  

220,013  

Proceeds from the issuance of common stock, net of issuance costs of $9,315

690,000  

145,935  

Exercise of stock options and vesting of restricted stock units

Proceeds from issuance of common stock, net of issuance costs of $5,568

Proceeds from conversion feature of convertible senior notes, due 2025, net of allocated costs and deferred taxes of $8,338

63,428  

Dividends paid, $0.64 per share

Stock-based compensation

Currency translation recognized in earnings from the exit of Cold Chain Packaging Division

( 3,165 )  

Stock-based compensation expense

Foreign currency translation

26,485  

Adoption of accounting standards, net

March 31, 2021

*Accumulated Other Comprehensive (Loss) Income.

5,140,568  

$ 317,652  

$ 72,459  

$ 16,116  

$ 406,227  

*Accumulated Other Comprehensive Income (Loss).

See accompanying notes to consolidated financial statements.

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Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

Stock-based compensation

Impairment loss on goodwill and long-lived assets

Loss (gain) on disposition of assets

Non-cash interest and debt amortization

Amortization of step-up in inventory basis

Change in inventory reserve

Deferred taxes

Adjustment to contingent consideration

Cash (used in) provided by changes in operating assets and liabilities

Accounts receivable, net

Inventories, net

Prepaid expenses and other assets

Accounts payable

Accrued liabilities and taxes payable

Unearned revenues

$ 3,274  

$ 1,778  

$ 7,484  

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization  

17,660  

12,990  

Stock-based compensation  

Impairment loss on goodwill and long-lived assets  

Non-cash interest and debt amortization  

Amortization of step-up in inventory basis  

( 436 )  

Deferred taxes  

( 3,503 )  

( 1,971 )  

( 311 )  

Cash provided by changes in operating assets and liabilities  

Accounts receivable, net  

( 647 )  

( 1,665 )  

Inventories  

Prepaid expenses and other assets  

( 432 )  

Accounts payable  

( 61 )  

Accrued liabilities and taxes payable  

( 317 )  

( 2,147 )  

Unearned revenues  

Net cash provided by operating activities

37,073  

26,988  

30,554  

Cash flows from investing activities:

Purchases of property, plant and equipment

Proceeds from sale of assets

Acquisitions  

( 184,102 )  

Purchases of property, plant and equipment  

( 1,992 )  

( 1,498 )  

Proceeds from the sale of assets  

Net cash (used in) investing activities

( 1,992 )  

( 185,585 )  

Cash flows from financing activities:

Proceeds from the issuance of debt

Proceeds from the issuance of convertible senior notes

Payment of debt issuance costs

Proceeds from the issuance of common stock, net

Payments of debt

Payments of Contingent Consideration

Proceeds from the exercise of stock options

Proceeds from the issuance of common stock, net  

145,935  

84,995  

Proceeds from the issuance of convertible senior notes, net  

172,500  

Proceeds from the issuance of debt  

Dividends  

( 3,165 )  

( 2,722 )  

Payments of contingent consideration  

( 304 )  

( 11 )  

Proceeds from the exercise of stock options  

Payment of debt issuance costs  

( 664 )  

( 5,430 )  

Payments of debt  

( 23,000 )  

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

146,228  

231,277  

Effect of exchange rate changes on cash and cash equivalents  

( 1,485 )  

Net increase in cash and cash equivalents

182,485  

71,195  

Cash and cash equivalents at beginning of period

81,380  

10,185  

Cash and cash equivalents at end of period

$ 263,865  

$ 81,380  

$ 10,185  

Supplemental non-cash activity:

Deferred tax liability related to the conversion option associated with the convertible senior notes

$ 7,359  

Contingent consideration as part of an acquisition

1 unchanged sentence

Income taxes paid

$ 1,367  

$ 2,634  

$ 5,870  

Interest paid

$ 2,372  

$ 1,627  

$ 1,637  

See accompanying notes to consolidated financial statements.

4 unchanged sentences

Description of Business

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

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.

In this Annual Report on Form 10 -K, Mesa Laboratories, Inc., a Colorado corporation, together with its subsidiaries is collectively referred to as “we,”

“us,”

“our,”

the “Company”

or “Mesa Labs.”

We are a multinational manufacturer, developer, and seller of quality control products and services, many of which are sold into niche markets that are driven by regulatory requirements.

We have manufacturing operations in North America and Europe and our products are marketed by our sales personnel in North America, Europe, and Asia, and by independent distributors in these areas as well as throughout the rest of the world.

We prefer markets in which we can establish a strong presence and achieve high gross margins.

As of March 31, 2020 we are organized into four divisions, each of which represents a reportable segment.

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.

March 31, 2021 , we managed our operations in 

four  reportable segments, or divisions.

Our Sterilization and Disinfection Control division manufactures and sells biological, cleaning, and chemical indicators which 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.

With the acquisition of Gyros Protein Technologies Holding AB ("GPT" and the "GPT Acquisition") during the third quarter of fiscal year ended March 31, 2020 (which we refer to as "fiscal year 2020"), which is discussed further in Note 4.

"Significant Transactions," we added a new reportable segment:

Biopharmaceutical Development.

Our Biopharmaceutical Development Division develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions.

Immonoassays and peptide synthesis solutions accelerate the discovery, development, and manufacturing of biotherapeutic drugs.

Our Continuous Monitoring Division, (formerly Cold Chain Monitoring), 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 operating segment has ceased operations and is no longer considered a reportable segment.

Cold Chain Packaging results, along with any unallocated corporate expenses, are reported within Corporate and Other.

Our Instruments division designs, manufactures, and markets quality control hardware and disposable products utilized in the healthcare, pharmaceutical, food and beverage, medical device, industrial hygiene, and environmental air sampling industries.

During the year ended 

March 31, 2020, we added a new reportable segment:

Biopharmaceutical Development as a result of our acquisition of Gyros Protein Technologies Holding AB ("GPT" or the "GPT acquisition"), which is discussed further in Note 4.

 "Significant Transactions." Our Biopharmaceutical Development division develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions.

Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacturing of biotherapeutic drugs.

Our Continuous 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. 

Non-reportable operating segments (including our Cold Chain Packaging division which ceased operations during the year ended 

March 31, 2020) 

and unallocated corporate expenses are reported within Corporate and Other.

Principals of Consolidation and Basis of Presentation

Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include our accounts and our wholly owned subsidiaries after elimination of all intercompany accounts and transactions.

Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include our accounts and wholly owned subsidiaries after elimination of all intercompany accounts and transactions.

GPT results are consolidated with Mesa's financial statements beginning November 1, 2019, the first full day following the acquisition.

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Foreign Currency

Exchange rate adjustments resulting from foreign currency transactions are recognized in net earnings, whereas effects resulting from the translation of financial statements are reflected as a component of accumulated other comprehensive income (loss) within stockholders’ equity.

Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S.

dollars are translated into U.S.

dollars using year end exchange rates and statements of operations accounts are translated at weighted average rates.

dollars at period end exchange rates, and statements of income accounts are translated at weighted average rates. 

Fair Value of Financial Instruments

Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants.

For assets and liabilities recorded or disclosed at fair value on a recurring basis, we determine fair value based on the following:

Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets;

quoted prices for identical or similar assets and liabilities in markets that are not active;

or other inputs that are observable or can be corroborated with observable market data.

Unobservable inputs for the asset or liability.

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

We determine fair value based on the following input hierarchy:

Quoted prices for identical assets or liabilities in active markets.

Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated with observable market data.

Unobservable inputs supported by little or no market activity.

Pricing models, discounted cash flow methodologies, and other similar techniques involving significant management judgment or estimation typically require unobservable inputs.

Revenue Recognition

Our revenues come from product sales, which include hardware and software, and consumables;

as well as services, which include installation, discrete maintenance services, and ongoing maintenance contracts.

Revenue is recognized when obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to our customers.

We recognize as revenue the amount of consideration we expect to receive in exchange for transferring products or services to our customers (the transaction price).

Our revenues are generated from product sales, including hardware and perpetual license software and consumable products, as well as services, including product installations, discrete and ongoing maintenance services, and software subscriptions.

Revenues are recognized when we satisfy our performance obligations under the terms of a contract, which occurs when control of the promised products or services transfers to our customers. We recognize as revenue the amount of consideration we expect to receive in exchange for transferring products or services to our customers (the transaction price).

For all revenue arrangements, prices are fixed at the time of purchase and no price protections or variables are offered.

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Product sales:

Our performance obligations related to the sale of instruments and consumable generally consist of the promise to sell tangible goods to distributors or end users.

Ownership of these goods is typically transferred at the time of shipment, at which time we have satisfied our performance obligation.

Evidence of an arrangement is typically in the form of a purchase order.

Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied, typically by shipping ordered products.

We generally generate service revenues from three categories:

1) discrete installation or testing 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.

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 specified work.

Alternately, 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 that may or may not be invoked.

Evidence of a service arrangement may be in the form of a formal contract or a purchase order.

Collectability is reasonably assured through our customer credit and review process, and payment is typically due within 60 days or less.

We elected the practical expedient allowing us to expense commission costs as incurred.

For the substantial majority of our contracts that have an original duration of one year or less, we have not disclosed the transaction price for future performance obligations as of the end of each reporting period or when we expect to recognize sales.

Additionally, we have elected the practical expedient which permits us to not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less.

None of our contracts contained a financing component as of March 31, 2020.

Our performance obligations related to product sales generally consist of the promise to sell tangible goods to distributors or end users.

Control of these goods is typically transferred upon shipment, at which time our performance obligation is satisfied and revenue is recognized.

For products requiring installation, control transfers to the customer and revenue is recognized when our technicians have completed the installation at the customer’s location.

Purchase orders typically provide evidence of an arrangement for product sales.

Products sold include an assurance-type warranty which is accounted for as part of accrued warranty expense. 

Services: 

We generate service revenues from three categories:

1 ) discrete installation of hardware and software products, 2 ) discrete calibration, testing, and maintenance services, and 3 ) contracted and recurring calibration, testing, and maintenance services and software license subscriptions.

Performance obligations arise when discrete services are contracted in advance and performed at a future time, often at the time of the customer’s choosing.

In such cases, our performance obligation is satisfied and revenue is recognized upon the customer’s acceptance of completion of the specified work.

Alternately, performance obligations arising from annual service contracts are satisfied by completing any service that is contractually required during the contract period, if requested by the customer, or simply by the passage of time if no services are requested.

Performance obligations arising from software subscriptions are satisfied by the passage of time.

For both annual service contracts and software subscriptions, revenue is recognized on a straight-line basis over the life of the contract in a faithful depiction of our obligation to provide services over the contract period.

Evidence of a service arrangement may be in the form of a formal contract or a purchase order. 

Collectability is reasonably assured through our customer review process, and payment is typically due within 60 days or less.

Upon adoption of Accounting Standards Codification ("ASC") 

606, we elected the practical expedient to expense commission costs as incurred.

For the substantial majority of our contracts, which have original durations of one year or less, we have elected not  to disclose the expected timing or allocated transaction prices of future performance obligations.

Additionally, we have elected the practical expedient to not assess whether a significant financing component exists when the period between when we perform our performance obligation and when the customer remits payment is one year or less.

None of our contracts contained a financing component as of March 31, 2021 or March 31, 2020. 

Contracts with customers may contain multiple performance obligations.

For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation.

We determine standalone selling prices based on the price at which the performance obligation is sold separately.

If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

Standalone selling prices are based on the price at which the performance obligation is sold separately.

If the standalone selling price is not observable through past transactions, we estimate the standalone selling price considering available information such as market conditions and internally approved pricing guidelines. 

Shipping and handling

Payments by customers to us for shipping and handling costs are included in revenues on the consolidated statements of operations, while our expense is included in cost of revenues.

Shipping and handling for inventory and materials purchased by us is included as a component of inventory on the consolidated balance sheets, and in cost of revenues when the product is sold.

Payments made by customers to us for shipping and handling costs are included in revenues on the Consolidated Statements of Income, and our expenses are included in cost of revenues.

Our performance obligation with respect to shipping and handling consists of a promise to secure such services from a third party on behalf of our customers.

Shipping and handling for inventory and materials we purchase is included as a component of inventory on the Consolidated Balance Sheets, and in cost of revenues when products are sold. 

Unearned Revenues

Certain of our products have associated annual service contracts whereby we provide repair, technical support, and various other analytical or maintenance services.

In the event that these contracts are paid up front by the customer, the associated amounts are deferred and recognized ratably over the term of the service period, generally one year.

Certain of our products have associated annual service contracts whereby we provide repairs, technical support, and various other analytical or maintenance services.

In the event these contracts are paid in advance by the customer, the associated amounts are deferred and recognized ratably over the term of the service period, generally one year.

Accrued Warranty Expense

We provide limited product warranty on our products and, accordingly, accrue an estimate of the related warranty expense at the time of sale.

We provide a limited product warranty on our products and, accordingly, accrue an estimate of the related warranty expense at the time of sale.

Cash and Equivalents

We classify all highly liquid investments with a maturity of three months or less at the date of purchase as cash equivalents, including highly liquid investments in money market funds with an original maturity of three months or less.

All cash equivalents are carried at cost, which approximates fair value.

We classify all highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents, including highly liquid investments in money market funds with original maturities of three months or less.

All cash equivalents are carried at cost, approximating fair value.

Accounts Receivable and Allowance for Doubtful Accounts

All trade accounts are reported at net realizable value on the accompanying Consolidated Balance Sheets, adjusted for any write-offs and net of allowances for doubtful accounts.

The allowance for doubtful accounts represents our best estimate of the credit losses expected from our trade accounts.

We use judgment about the timing, frequency, and severity of credit losses to determine the allowances, and a difference from our original judgment could materially affect the provision for credit losses and, therefore, net earnings.

We regularly perform detailed reviews of our receivables to determine if an impairment has occurred and we evaluate the collectability of receivables based on a combination of various financial and qualitative factors that may affect customers’ ability to pay, including customers’ financial condition, and history of payment.

In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected.

Additions to the allowances for doubtful accounts are charged to current period earnings, amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances.

If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional reserves would be required.

We do not believe that trade accounts receivable represent significant concentrations of credit risk because of the diversified portfolio of individual customers and geographical areas.

We recorded $1, $13 and $17 of expense associated with doubtful accounts for the years ended March 31, 2020 , 2019 and 2018 , respectively.

Inventories include the costs of materials, labor, and overhead.

Inventories are stated at the lower of cost or net realizable value, using the estimated average cost per unit to determine cost.

We evaluate labor and overhead costs annually, unless specific circumstances necessitate a mid-year evaluation.

Our work in process and finished goods inventory includes raw materials, labor and overhead, which are estimated based on trailing twelve months of expense and standard labor hours for each product.

The significant majority of our sterilization and disinfection control inventory is tracked by lot number, thus it is generally based on actual hours.

We monitor inventory cost compared to selling price in order to determine if a lower of cost or net realizable value reserve is necessary.

Throughout the year, we perform various physical cycle count procedures on our inventories and we estimate and maintain an inventory reserve, as needed, for such matters as obsolete inventory, shrink and scrap.

Allowances for doubtful accounts represent our best estimate and current expectation of future credit losses from trade accounts.

We estimate credit losses based on historical information, current and expected future economic and market conditions, and reviews of the current status of customers’

trade accounts receivable.

Customers are pooled based on shared specific risk factors such as historical credit loss patterns.

In circumstances in which we become aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected.

We do not believe our trade accounts receivable represent significant concentrations of credit risk due to our diversified portfolio of individual customers and geographical areas.

Differences may arise between estimated and actual losses, which could materially affect the provision for credit losses and, therefore, net earnings. We recorded $ 100 , $ 1  and $ 13  of expense associated with doubtful accounts for the years ended March 31, 2021 , 

2020 and 2019 , respectively.

See "Recently Adopted Accounting Pronouncements" for further information regarding credit losses for accounts receivable and our April 1, 2020 adoption of ASU 

2016 - 13,  

Financial Instruments - Credit Losses (Topic 

Measurement of Credit Losses on Financial Instruments , as modified by ASU 

2018 - 19,  

Codification Improvements to Topic 

326,  Financial Instruments - Credit Losses .

Inventories are stated at the lower of cost or net realizable value using a weighted average methodology.

Our work in process and finished goods inventories include the costs of raw materials, labor and overhead, which are estimated based on trailing twelve months of expense and standard labor hours for each product.

We evaluate labor and overhead costs annually unless specific circumstances necessitate a mid-year evaluation for specific items.

We monitor inventory costs relative to selling prices and perform physical cycle count procedures on inventories throughout the year to determine if a lower of cost or net realizable value reserve is necessary.

We estimate and maintain an inventory reserve as needed for such matters as excess or obsolete inventory, shrinkage, and scrap. Once inventory is written down, a new cost basis is established that is not subsequently written back up in future fiscal years.

Property, Plant and Equipment

Property, plant and equipment are stated at cost.

Expenditures for major renewals and improvements are capitalized, while expenditures for minor replacements, maintenance and repairs are expensed as incurred.

Depreciation is calculated using the straight-line method over the estimated useful lives of our assets.

Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and any related gain or loss is reflected in other expense, net in the accompanying Consolidated Statements of Operations.

At least annually, we evaluate, and adjust when necessary, the estimated lives of property, plant and equipment.

Property, plant and equipment are stated at cost, except for assets acquired in acquisitions, which are recorded at fair value.

Expenditures for major renewals and improvements that extend the life of the asset are capitalized, while expenditures for minor replacements, maintenance and repairs are expensed as incurred.

Depreciation is calculated using the straight-line method over the assets’

estimated useful lives.

Upon asset retirement or disposal, accounts are relieved of cost and accumulated depreciation, and any related gain or loss is reflected in our results of operations.

For certain business consolidation activities, accelerated depreciation may be required for the revised remaining useful lives of assets designated to be abandoned.

At least annually, we evaluate and adjust as necessary the estimated lives of property, plant and equipment.

Any changes in estimated useful lives are recorded prospectively.

Estimated useful lives of depreciable assets are as follows:

Buildings (years)

Manufacturing Equipment (years or less)

Computer equipment (years or less)

Manufacturing equipment 

7 years (or less)

Computer equipment 

3 years (or less)

Land is not depreciated and construction in progress is not depreciated until placed in service.

Leasehold improvements are depreciated over the lesser of the economic life or the remaining term in the respective lease.

We adopted ASU 2016-02, “Leases (Topic 842)” (“ASC 842”) as of April 1, 2019.

Under ASC 842, we determine whether contractual arrangements contain a lease at the inception of the arrangement.

If a lease is identified in an arrangement, we recognize a right-of-use asset and liability on our Consolidated Balance Sheets and determine whether the lease should be classified as a finance or operating lease.

Leasehold improvements are depreciated over the lesser of the economic life or the remaining term in the respective lease. 

We adopted ASU 2016 - 02,  “Leases (Topic 842 )”

(“ASC 842”

) as of April 1, 2019.

Under ASC 842, we determine whether contractual arrangements contain a lease at the inception of the arrangement.

If a lease is identified in an arrangement, we recognize a right-of-use asset ("ROU") and liability on our Consolidated Balance Sheets and determine whether the lease should be classified as a finance or operating lease.

We do not have any finance leases.

We do not recognize assets or liabilities for leases with lease terms of less than 12 months.

Under the new lease standard, a contract is a lease or contains one when (1) the contract contains an explicitly or implicitly identified asset and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration.

not recognize assets or liabilities for leases with lease terms of less than 12 months and our short-term leases are not material.

Under ASU 2016 - 02, a contract is a lease or contains one when ( 1 ) the contract contains an explicitly or implicitly identified asset and ( 2 ) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration.

Operating lease assets and liabilities are recognized at the lease commencement date.

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Adjustments would also be made for accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets, none of which are present in any of our current lease contracts.

When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease.

Otherwise we use our incremental borrowing rate based on the information available at lease commencement.

Our short term leases are not material.

When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease, otherwise we use our incremental borrowing rate based on the information available at lease commencement. 

Our leases typically contain rent escalations over the lease term.

We recognize expense for these leases on a straight-line basis over the lease term.

Lease expense is recorded in cost of products, selling, general and administrative, or research and development on our Statements of Operations, depending on the nature of use of the underlying asset.

Many of our leases include one or more renewal or termination options at our discretion, which are included in the determination of the lease term if we are reasonably certain to exercise the option.

Lease expense is recorded in cost of products, selling, general and administrative, or research and development on our Consolidated Statements of Income, depending on the nature of use of the underlying asset.

Many of our leases include one or more renewal or termination options exercisable at our discretion, which are included in the determination of the lease term if we are reasonably certain to exercise the option.

We have also entered into lease agreements that have variable payments related to certain indexes.

Variable lease payments are recognized in the period in which those payments are incurred.

All nonlease components are readily identifiable in our lease contract.

We account for non-lease components separately from the lease component to which it is related.

Goodwill and Intangible Assets

Goodwill and other intangible assets result from our acquisition of existing businesses.

Goodwill and indefinite-lived intangible assets (trademarks that we intend to renew and continue using indefinitely) are not subject to amortization, but instead are tested for impairment at least annually or when events or changes in circumstances indicate that the carrying amount may not be recoverable, and we are required to record any necessary impairment adjustments.

We perform impairment tests of goodwill at our reporting unit level.

Upon an acquisition, we record the fair value of identifiable intangible assets using, among other sources of relevant information, independent appraisals, or actuarial or other valuations.

We determine the useful lives of our finite intangible assets after considering the specific facts and circumstances related to each intangible asset.

Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions.

Intangible assets that are deemed to have definite lives are amortized on a straight-line basis, over their useful lives, generally ranging from three to 16 years (See Note 8.

“Goodwill and Long-Lived Assets”).

Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

For the purposes of reviewing finite-lived assets for potential impairment, assets are grouped at the asset group level.

The fair value measurement for intangible asset impairment is based on Level 3 inputs.

See “Fair Value of Financial Instruments” for a description of level inputs.

We first compare the carrying value of the asset to the asset’s estimated future undiscounted cash flows.

If the estimated undiscounted future cash flows are less than the carrying value of the asset, we determine if we have an impairment loss by comparing the carrying value of the asset to the asset's estimated fair value.

The estimated fair value of the asset is generally determined using a discounted cash flow projection model.

In certain cases, management uses other market information, when available, to estimate the fair value of an asset.

The impairment charges represent the excess of each asset’s carrying amount over its estimated fair value.

We believe that our goodwill and intangible assets are recoverable as of March 31, 2020.

All non-lease components are readily identifiable in our lease contract.

We account for non-lease components separately from the lease component to which it is related. 

Acquired Intangible Assets

Our goodwill and other intangible assets result from acquisitions of existing businesses.

Upon acquisition, we record the fair value of identifiable indefinite and definite lived intangible assets using, among other sources of relevant information, independent appraisals, or actuarial or other valuations.

Intangible assets affect the amount of future amortization expense and possible impairment charges we may incur.

Goodwill and indefinite lived intangible assets (trademarks we intend to renew and continue using indefinitely) are not subject to amortization and are tested for impairment qualitatively, and if necessary, quantitatively, at least annually during the fourth quarter of our fiscal year, or when events or changes in circumstances indicate it may be more likely than not that carrying value exceeds fair value.

We perform impairment tests of goodwill at the reporting unit level and tests for other indefinite lived intangible assets at the asset level.

Intangible assets deemed to have definite lives are amortized on a straight-line basis over their useful lives, generally ranging from five to 15 years (See Note 8.

“Goodwill and Long-Lived Assets”).

We determine the useful lives of finite intangible assets based on the specific facts and circumstances related to each asset, and we evaluate the appropriateness of assigned useful lives at least annually.

Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and economic factors such as competition or specific market conditions.

Definite-lived intangible assets are tested for impairment only if events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group might not be recoverable.

The fair value measurement used in testing intangible asset impairment is typically based on discounted cash flow projection models, using Level 3 inputs.

See “Fair Value of Financial Instruments” for a description of input levels.

In certain cases, management uses other market information when available to estimate fair value.

Impairment charges represent the excess carrying amount over estimated fair value. We do not believe our goodwill and other intangible assets are impaired as of March 31, 2021.

Research & Development Costs

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Research and development costs are expensed as incurred.

Debt Accounting

As of March 31, 2021, our long-term debt balance is related to our 1.375 % convertible senior notes due 2025, which were issued in August 2019 and are carried at their principal amount less unamortized debt discount.

We account for our convertible notes as separate liability and equity components.

We established the initial carrying amount of the liability component by estimating the fair value of a similar liability without an associated conversion feature.

The initial carrying value of the equity component was calculated by deducting the initial carrying value of the liability component from the principal amount of the Notes as a whole.

We then allocated transaction costs related to the issuance of the Notes to the liability and equity components in proportion to their initial carrying values.

Debt discount is amortized to interest expense in our Consolidated Statements of Income over the term of the convertible notes using the effective interest rate method.

We assess the equity classification of the cash conversion feature and the long-term debt classification of the liability component quarterly.

Stock-based Compensation

We issue shares in the form of stock options and full-value awards as part of employee compensation pursuant to the Mesa Laboratories, Inc.

2014 Equity Plan (the "2014 Equity Plan").

Stock options and service-based stock awards generally vest equally over a four or five year term and stock options generally expire after six years.

Awards granted to non-employee directors generally vest one year from the grant date.

We record stock-based compensation expense based on the fair value of stock awards at the grant date and recognize the expense over the related service period following a straight line vesting expense schedule.

We allocate stock-based compensation expense to cost of revenues, selling, research and development, and general and administrative expense in the Consolidated Statements of Operations.

The fair value of each stock option granted is estimated on the grant date using the Black-Scholes option valuation model.

The assumptions used to calculate the fair value of options granted reflect market conditions and our historical experience.

We estimate forfeitures based on historical data when determining the amount of stock-based compensation costs to be recognized in each period using a dynamic forfeiture model.

2014 Equity Plan (the "2014 Equity Plan"). 

Stock options and service-based stock awards generally vest equally over a three to 

five year term and stock options generally expire after 

six  years. Awards granted to non-employee directors generally vest one year from the grant date.

We recognize stock-based compensation expense based on the fair value of stock awards at the grant date and recognize the expense over the related service period using a straight line vesting expense schedule.

We allocate stock-based compensation expense to cost of revenues, selling, research and development, and general and administrative expense in the Consolidated Statements of Income.

The fair value of each granted stock option is estimated on the grant date using the Black-Scholes option valuation model.

The assumptions used to calculate the fair value of granted options reflect market conditions and our historical experience.

We estimate forfeitures using a dynamic forfeiture model based on historical data when determining the amount of stock-based compensation costs to recognize each period.

Restricted stock units ("RSUs") issued by us are equivalent to nonvested shares under the applicable accounting guidance.

The fair value of RSUs is based on the closing price of Mesa's common stock on the award date, less the present value of expected dividends not received during the vesting period.

The fair value of RSUs is based on the closing price of Mesa Labs' common stock on the award date, less the present value of expected dividends not received during the vesting period.

Expense for performance-based RSUs ("PSUs") is recognized when it is probable the performance goal will be achieved.

Performance goals are determined by the Board of Directors and may include measures such as revenues growth and profitability targets.

Compensation expense on stock awards subject to performance conditions is recognized over the longer of the estimated performance goal attainment period or time vesting period.

Income tax expense includes U.S., state, local and international income taxes, plus a provision for U.S.

Compensation expense on stock awards subject to performance conditions is recognized over the longer of the estimated performance goal attainment period or time vesting period.

As of each reporting period, we estimate the number of PSUs expected to vest based on our current estimate of performance compared to the target metrics in the award documents, and if necessary, a cumulative-effect adjustment is recorded.   

Earnings  

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 it includes the effects of potential common shares related to stock options, restricted stock units, performance share units, and convertible debt in periods in which such effects are dilutive.

Potentially dilutive securities are excluded from the calculation of diluted EPS in the event they are subject to performance conditions that have not yet been achieved.

“Earnings per Share”

for EPS calculations for the years ended March 31, 2021, 2020, and 2019.

Income tax expense includes U.S., state, local and international income taxes, plus a provision for U.S.

taxes on undistributed earnings of foreign subsidiaries and other prescribed foreign entities not deemed to be indefinitely reinvested.

Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting basis and the tax basis of existing assets and liabilities.

The tax rate used to determine the deferred tax assets and liabilities is the enacted tax rate for the year and manner in which the differences are expected to reverse.

The tax rate used to determine the deferred tax assets and liabilities is based on the enacted tax rate for the year and the manner in which the differences are expected to reverse.

Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

We are involved in various tax matters, with respect to some of which the outcome is uncertain.

We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that it becomes uncertain based upon one of the following conditions:

(1) the tax position is not “more likely than not” to be sustained, (2) the tax position is “more likely than not” to be sustained, but for a lesser amount, or (3) the tax position is “more likely than not” to be sustained, but not in the financial period in which the tax position was originally taken.

For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information;

(2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position;

and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken.

We are involved in various tax matters, some of which have uncertain outcomes.

We establish reserves to remove some or all of the tax benefits related to our tax positions at the time we determine one of the following conditions exists:

( 1 ) the tax position is not “more likely than not”

 to be sustained, ( 2 ) the tax position is “more likely than not”

 to be sustained, but for a lesser amount, or ( 3 ) the tax position is “more likely than not”

 to be sustained, but not in the financial period in which the tax position was originally taken.

For purposes of evaluating whether a tax position is uncertain, ( 1 ) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information;

( 2 ) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position;

and ( 3 ) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken.

A number of years may elapse before a particular uncertain tax position is audited and finally resolved or when a tax assessment is raised.

The number of years subject to tax assessments varies depending on the tax jurisdiction.

The tax benefit that has been previously reserved because of a failure to meet the “more likely than not” recognition threshold would be recognized in income tax expense in the first interim period when the uncertainty disappears under any one of the following conditions:

(1) the tax position is “more likely than not” to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the tax position has expired (See Note 14.

“Income Taxes”).

A tax benefit that has been previously reserved because of a failure to meet the “more likely than not”

 recognition threshold would be recognized in income tax expense in the first period when the uncertainty disappears under any of the following conditions:

( 1 ) the tax position is “more likely than not”

 to be sustained, ( 2 ) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or ( 3 ) the statute of limitations for the tax position has expired (See Note 14.

“Income Taxes”).

Acquisition Related Contingent Consideration Liabilit ies

Acquisition related contingent consideration liabilities consist of estimated amounts due under various acquisition agreements and is typically based on either revenues growth or specified profitability growth metrics.

At each reporting period, we evaluate the expected future payments and the associated discount rate to determine the fair value of the contingent consideration, and record any necessary adjustments in other expense, net on the Consolidated Statements of Operations.

Acquisition related contingent consideration liabilities consist of estimated amounts due under various acquisition agreements and are typically based on either revenues growth or specified profitability growth metrics.

At each reporting period, we evaluate the expected future payments and the associated discount rate to determine the fair value of the contingent consideration, and we record any necessary adjustments in other expense, net on the Consolidated Statements of Income.

Legal Contingencies

We are involved in various claims and legal proceedings that arise in the normal course of business.

We record an accrual for legal contingencies when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the loss (See Note 15.

“Commitments and Contingencies”).

For the years ended March 31, 2020 , 2019 , and 2018 , our acquisitions of businesses (net of cash acquired) totaled $184,102, $4,840, and $15,518, respectively.

We are party to various claims and legal proceedings that arise in the normal course of business.

We record an accrual for legal contingencies when we determine it is probable we have incurred a liability and can reasonably estimate the amount of the loss (See Note 15.

“Commitments and Contingencies”).

Purchase Accounting for Acquisitions

We account for all business combinations in which we obtain control over another entity using the acquisition method of accounting, which requires most assets (both tangible and intangible) and liabilities (including contingent consideration) to be recognized at fair value at the date of acquisition.

The excess of the purchase price over the fair value of assets less liabilities is recognized as goodwill.

We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses.

These types of analyses require us to make and monitor assumptions and estimates regarding industry and economic factors, the profitability of future business strategies, discount rates and cash flow.

Certain adjustments to the assessed fair values of acquired assets or liabilities made subsequent to the acquisition date but within the measurement period are recorded as adjustments to goodwill.

Any adjustments subsequent to the measurement period are recorded within earnings. We expense all costs as incurred related to an acquisition in selling, general, and administrative expenses.

Results of operations of the acquired company are included in our Consolidated Financial Statements from the date of the acquisition forward.

If actual results are not consistent with our assumptions and estimates, or if our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.

For the years ended March 31, 2021 , 

2020 and 2019 , our acquisitions of businesses (net of cash acquired) totaled $ 0 , $ 184,102 , and $ 4,840 , respectively.

Business Consolidation Costs

We estimate our liabilities for business closure activities by gathering detailed estimates of costs and, if applicable, asset sale proceeds, for each business consolidation initiative.

For a typical business consolidation initiative, we estimate costs of employee severance, impairment of property and equipment and other assets including estimating net realizable value, if necessary, accelerated depreciation, termination payments for contracts and leases, and any other qualifying costs related to the exit plan.

Such charges represent our best estimates; however, they require assumptions about plans that may change over time. The estimated costs are grouped by specific projects within the overall exit plan and are monitored at each reporting period, and any subsequent change to the original estimate is recorded in current earnings. 

Risks and Uncertainties

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods.

These estimates represent management's judgement about the outcome of future events.

The current global business environment continues to be impacted directly and indirectly by the effects of the novel coronavirus ("COVID- 19 " ), and it is not possible to accurately predict the future impact of COVID- 19 .

 However, we have reviewed the estimates used in preparing the financial statements and have identified the following factors that have a reasonable possibility of being materially affected by the impacts of COVID- 19  during the near term: 

Estimates regarding the future financial performance of the business used in the impairment tests for goodwill and long-lived assets acquired in a business combination;

however, our impairment test conducted during the three months ended March 31, 2021 concluded that goodwill is not impaired;

Estimates regarding the recoverability of deferred tax assets and estimates regarding cash needs and associated indefinite reinvestment assertions;

Estimates regarding recoverability for customer receivables;

Estimates of the net realizable value of inventory.

Immaterial Error Corrections

During the 

three  months ended 

September 30, 2020, 

we identified an immaterial error in the design of our Enterprise Resource Planning tool that resulted in a system failure to eliminate intercompany cost of revenues for certain types of transactions.

The error resulted in an overstatement of cost of goods sold and an understatement in gross profit for the Continuous Monitoring, Instruments, and Sterilization and Disinfection Control divisions. The issue began during the 

three  months ended 

June 30, 2019; 

we have determined that 

no  financial statement prior to 

April 1, 2019 

was misstated as a result of the previously uneliminated balances in cost of revenues. 

In accordance with Staff Accounting Bulletin ("SAB") 

Materiality , and SAB 

Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements , we evaluated the error quantitatively and qualitatively and determined that the related impact was 

not  material to our financial statements for any prior annual or interim period, but that correcting the cumulative impact of the error would be significant to our results of operations for the 

three  months ended 

September 30, 2020. 

In considering the quantitative and qualitative materiality, we concluded that the impact of the error correction is 

not  material in absolute dollar amount, especially since reported results for the year ended March 31, 2020 included various new non-cash charges that reduced net income below historical levels. Accordingly, we have revised previously reported financial information for the immaterial error.

We performed manual intercompany elimination calculations and determined that cost of revenues and accumulated other comprehensive income were overstated by $429  for the year ended 

March 31, 2020, 

which would increase operating income and net income by 

$429  and diluted earnings per share by 

 there was 

no  income tax impact on the full year adjustment since the inventory balance was 

not  misstated.  To correct the immaterial error, we have restated retained earnings as of 

March 31, 2020.

Additionally, during the 

three  months ended 

June 30, 2020, 

cost of revenues was overstated by $372, which after the impact of taxes would increase net income by $192  and diluted earnings per share by 

 We restated retained earnings as of 

June 30, 2020 

in the amount of $ 192 .

The immaterial error has no impact on total cash flows for any of the periods presented.

The presentation of the balance sheet for the year ended March 31, 2020 and components of the purchase price allocation shown in Note 4.

"Significant Transactions" inaccurately classified deferred tax assets and deferred tax liabilities which has been corrected in the related disclosures presented herewith.

The error did not affect disclosures related to income taxes, net income, or the statement of cash flows;

it was limited to the balance sheet presentation of the deferred tax line items. 

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, Financial Instruments -Credit Losses (Topic 316):

Measurement of Credit Losses on Financial Instruments, as modified by ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables.

This may result in earlier recognition of allowances for losses.

The ASU is effective for public business entities for fiscal years beginning after December 15, 2019, with early adoption permitted.

We are in the process of implementing changes to our accounting policies and processes for the new standard.

We believe that the most notable impact of this ASU will relate to our processes for assessing the adequacy of our allowance for doubtful accounts on trade accounts receivable and the recognition of credit losses.

We are still calculating the impact of expected credit losses on our accounts receivable, including accounting for the change to the macro-economic environment precipitated by the COVID-19 pandemic.

2020,  the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 

2020 - 06,  

Debt with Conversion and Other Options and Derivatives and Hedging Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , which simplifies the accounting for convertible instruments such as our 1.375% convertible senior notes due 

August 15, 2025 ( the "Notes"). The ASU is effective for annual reporting periods beginning after 

December 15, 2021, and early adoption is permitted for annual periods beginning after December 15, 2020. 

The update permits the use of either the modified retrospective or full retrospective method of adoption.

We intend to adopt the ASU on a modified retrospective basis effective April 1, 2021. 

Under the ASU, the Notes will be recorded in their entirety as a liability and will no longer be bifurcated between equity and liability components.

Upon adoption, the $ 30,092 equity conversion feature recorded to common stock (which represents $ 31,073 less allocated issuance costs of $ 981 ) will be removed, as will the associated unamortized discount of $ 22,799 .

The net effect of these adjustments, which represents historical non-cash interest expense of $ 7,293 , will be recorded as an increase in the balance of beginning retained earnings as of April 1, 2021.

We are currently evaluating the expected deferred tax and other impacts of adoption. 

In December 2019, the FASB issued ASU No.

2019 - 12, Simplifying the Accounting for Income Taxes .

The new standard removes certain exceptions to the general principles in ASC 740  

Income Taxes  and also clarifies and amends existing guidance to provide for more consistent application.

This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

We intend to adopt the standard effective April 1, 2021.

The ASU is currently not expected to have a material impact on our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued 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 sheets 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.

On April 1, 2019, we adopted ASU 2016-02 using the modified retrospective method for all lease arrangements at the beginning of the period of adoption.

Results for reporting periods beginning April 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under topic 840, Leases.

The standard had a material impact on our Consolidated Balance Sheets, but did not have a significant impact on our Consolidated Statements of Operations or our Consolidated Statements of Cash Flows.

The most significant impact was the recognition of the right-of-use ("ROU") assets and lease liabilities on our Consolidated Balance Sheets.

As part of adopting the new lease standard, we have made the following elections:

To carry forward the historical lease determination and classification conclusions as established under the old standard, and not reassess initial direct costs for existing leases;

Not to apply the balance sheet recognition requirements of the new lease standard to leases with a term of one year or less (short-term leases);

For all classes of underlying assets, to account for non-lease components of a contract separately from the lease component to which they are related.

As a result of the cumulative impact of adopting ASU 2016-02, we recorded operating lease ROU assets of $1,461 and operating lease liabilities of $1,411 as of April 1, 2019.

Our calculations were based on the present value of the future lease payments on the date of adoption.

Refer to Note 7.

Leases for additional disclosures required by ASC 842.

June 2016, 

the FASB issued ASU 

2016 - 13,  

Financial Instruments - Credit Losses (Topic 

Measurement of Credit Losses on Financial Instruments , as modified by ASU 

2018 - 19,  

Codification Improvements to Topic 

326,  Financial Instruments - Credit Losses , which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables.

The ASU was effective for public business entities for fiscal years beginning after 

December 15, 2019, 

with early adoption permitted.

April 1, 2020, 

we adopted the ASU using the modified retrospective transition method.

We recorded a net decrease to beginning retained earnings of $ 9  as of 

April 1, 2020 

due to the cumulative effect of adopting Topic 

326's  requirement to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on our trade receivables.

As a result of the adoption of the ASU, our allowance for doubtful accounts as of 

March 31, 2021 

reflects our best estimate of the expected future losses for our accounts receivable based on current economic conditions. We have accounted for the macroeconomic impact of the COVID- 19  pandemic in our estimates, but due to the unprecedented nature of the impact of the pandemic, our estimates 

change, and future actual losses 

differ from current estimates.

We will continue to monitor economic conditions and will revise our estimate of expected future losses for accounts receivable as necessary.  

Revenue Recognition

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Our consumables, such as biological indicator test strips are typically used on a standalone basis;

however, some, that are used in protein synthesis and calibration solutions, are also critical to the ongoing use of our instruments.

however, some of our chemical solutions, such as protein synthesis and calibration solutions are critical to the ongoing use of our instruments.

Hardware and software sales, such as medical meters, protein synthesizers, 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.

Our newly acquired division, Biopharmaceutical Development, designs, manufactures, markets, and sells instruments, such as protein synthesizers that are used to process immunoassay samples and related software designed to enhance productivity;

consumable chemical solutions designed for use in testing;

and on-demand and long-term service contracts to support customers use of the equipment.

The division generates revenue from the same general categories as those we have identified for the rest of our business and recognizes revenue consistently with our policies.

We evaluate our revenues internally by product line, timing of revenue generation, and the nature of goods and services provided.

Hardware sales may be offered with accompanying perpetual or annual software licenses, which in some cases are required for the hardware to function.

We also offer on-demand and annual service contracts to support customers' use of our equipment.

We evaluate our revenues internally based on product line, the timing of revenue generation, and the 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.

Consumables are typically used on a one-time basis requiring frequent replacement in our customer's operating cycle.

The following tables present disaggregated revenues for the years ended March 31, 2020 , 2019 , and 2018 :

Consumables are typically used on a one -time basis requiring frequent replacement in our customers' operating cycles. Substantially all of our revenues and related receivables are generated from contracts with customers that are 

12  months or less in duration.

The following tables present disaggregated revenues for the years ended March 31, 2021 , 

2020 and 2019 :

Year Ended March 31, 2021

4 unchanged sentences

Discrete Revenues

$ 45,869  

$ 3,135  

$ 13,942  

$ 63,009  

Hardware and Software

21,346  

13,545  

44,019  

15,626  

Contracted Revenues

Services and Software

11,283  

Total Revenues

$ 53,119  

$ 32,465  

$ 33,892  

$ 14,461  

$ 133,937  

Year Ended March 31, 2020

4 unchanged sentences

Discrete Revenues

$ 42,654  

$ 3,197  

$ 4,981  

$ 2,436  

$ 53,311  

Hardware and Software

25,627  

40,090  

14,936  

Contracted Revenues

Services and Software

Total Revenues

$ 49,660  

$ 37,984  

$ 13,851  

$ 13,729  

$ 2,463  

$ 117,687  

Year Ended March 31, 2019

4 unchanged sentences

Discrete Revenues

$ 39,670  

$ 3,101  

$ 6,430  

$ 49,589  

Hardware and Software

24,500  

32,209  

12,069  

Contracted Revenues

Services and Software

Total Revenues

$ 46,297  

$ 36,125  

$ 13,806  

$ 6,907  

$ 103,135  

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 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).

Some customers prepay for services, resulting in unearned revenues or customer deposits, called contract liabilities, which are included within unearned revenues or other accrued expenses in the accompanying Consolidated Balance Sheets.

Contract assets would exist when sales are recorded (for example, 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.

Unbilled receivables, which are not classified as contract assets, represent arrangements in which sales have been recorded prior to billing and our right to payment is unconditional.

A summary of contract liabilities is as follows:

Contract liabilities balance as of March 31, 2020

$ 7,217  

Prior year liabilities recognized in revenues during the year ended March 31, 2021

1 unchanged sentence

Contract liabilities balance as of March 31, 2021

Unearned revenues of $2,716 associated with GPT are included in contract liabilities as of March 31, 2020.

Contract liabilities primarily relate to maintenance and service contract that had an original expected duration of 12 months or less and will be recognized to revenue as time passes.

$ 8,994  

Contract liabilities primarily relate to service and software contracts with original expected durations of 12 months or less and will be recognized to revenue as time passes. 

Fair Value Measurements

Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, obligations under trade accounts payable, and debt.

Due to their short-term nature, the carrying values for cash and cash equivalents, trade accounts receivable and trade accounts payable approximate fair value.

We measure our cash equivalents at fair value, and classify them within Level 1 of the fair value hierarchy and we value them using quoted market prices in an active market.

As of March 31, 2020 and March 31, 2019, cash and cash equivalents on our Consolidated Balance Sheets included $66,735 and $0, respectively, in a money market account.

Historically, we have had debt balances for our term loan and revolver;

however, the balances associated with those instruments were paid off during the year ended March 31, 2020.

Debt balances as of March 31, 2019 had a variable interest rate, so the carrying amount approximated fair value because interest rates on these instruments approximated the interest rate of debt with similar terms.

Cash and cash equivalents and accounts receivables are the financial instruments that subject us to the highest concentration of credit risk.

It is our policy to invest cash equivalents in highly liquid financial instruments with high credit ratings, and low exposure to a single issuer (except U.S.

Concentration of credit risk with respect to accounts receivable is limited to customers to which we make significant sales.

We reserve an allowance for potential write-offs of accounts receivable, but we have not written off any significant accounts to date.

To control credit risk, we perform regular credit evaluations of our customers’ financial condition.

During the year ended March 31, 2020, we issued $172,500 aggregate principal amount of 1.375% convertible senior notes due August 15, 2025 (the "Notes").

We estimate the fair value of the Notes based on the last actively traded price or market observable input before the end of the reporting period.

Due to their short-term nature, the carrying values of cash and cash equivalents, trade accounts receivable, and trade accounts payable approximate fair value.

As of March 31, 2021  and March 31, 2020 , respectively, cash and cash equivalents on our Consolidated Balance Sheets included $ 230,822  and $ 66,735 held in a money market account.

We classify cash equivalents within Level 1 of the fair value hierarchy, and we value them using quoted market prices in active markets.

The financial instruments that subject us to the highest concentration of credit risk are cash and cash equivalents and accounts receivable. It is our policy to invest in highly liquid cash equivalent financial instruments with high credit ratings and to maintain low single issuer exposure (except U.S.

treasuries). Concentration of credit risk with respect to accounts receivable is limited to customers to which we make significant sales.

To manage credit risk, we consider the creditworthiness of new and existing customers, and we and regularly review outstanding balances and payment histories.

We may require pre-payments from customers under certain circumstances and may limit future purchases until payments are made on past due amounts. We reserve an allowance for potential write-offs of accounts receivable, but we have not written off any significant accounts to date.

We have outstanding $ 172,500 aggregate principal of 1.375 % convertible senior notes due August 15, 2025.

We estimate the fair value of the Notes based on the last actively traded price or observable market input preceding the end of the reporting period.

The estimated fair value and carrying value of the Notes were as follows:

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Carrying Value

The Notes are discussed in more detail in Note 10.

"Indebtedness."

Fair Value (Level 2)

$ 145,675  

$ 188,780  

$ 140,278  

$ 173,363  

During the year ended March 31, 2021, we entered into a revolving credit facility which has a variable interest rate;

there is no balance outstanding on the credit facility as of March 31, 2021.

"Indebtedness" for further discussion on the Notes and the revolving credit facility. 

Assets recognized or disclosed at fair value on the Consolidated Financial Statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets.

These assets are measured at fair value if determined to be impaired.

Preliminary fair values assigned to the assets and liabilities acquired in the GPT Acquisition were measured using Level 3 inputs, as discussed further in Note 4.

"Significant Transactions." There were no transfers between the levels of the fair value hierarchy during the year ended March 31, 2020 and year ended March 31, 2019 respectively.

Fair values assigned to the assets and liabilities acquired in the GPT Acquisition were measured using Level 3 inputs, as discussed in Note 4.

"Significant Transactions." There were no transfers between fair value hierarchy levels during the years ended 

March 31, 2021 and March 31, 2020 . 

Significant Transactions

Business Consolidation Costs

Butler, New Jersey

During the year ended March 31, 2021, we made the decision to close our facility located in Butler, New Jersey during the quarter ending June 30, 2021.

The facility is primarily used in the production of our gas flow calibration and air sampling equipment, which is part of our Instruments division.

Our manufacturing facility in Lakewood, Colorado is currently undergoing renovations that will allow it to accommodate the production of the gas flow calibration and air sampling equipment.

Consolidating the production of these products is expected to reduce facilities costs and streamline our use of lean manufacturing tools under central management to further encourage production efficiencies.

As a result of the facility consolidation, we incurred a total of $ 588  of business consolidation costs during the year ended March 31, 2021, which were recorded to cost of revenues, selling, and general and administrative expense on the Consolidated Statements of Income.

Of the total expense, $ 335 related to severance, and $ 248 related to other costs, including accelerated depreciation.

As of March 31, 2021, a total of $ 317 remained outstanding and accrued, which primarily relates to severance costs.

We do not expect to incur any material expenses related to the Butler, New Jersey consolidation in future periods. 

Dissolution of Packaging Division

We exited the packaging business (formerly the Cold Chain Packaging Reportable Segment) during the year ended March 31, 2020 because it has historically been our least profitable segment and was no longer aligned with our long-term strategic goals. During the year ended March 31, 2020, we assisted our customers in transitioning their business to other packaging vendors and we stopped purchasing new inventory. As a result of completing our final sales in the division, we wrote off the remaining value of intangibles and goodwill, resulting in a charge to impairment of goodwill and long-lived assets of $ 276 during the year ended March 31, 2020.

During the year ended March 31, 2019 we recorded an impairment of goodwill and long-lived assets of $ 4,774 due to the decline of the packaging division.

We incurred $ 51  and $ 150  of severance and facility closure expenses during the years ended March 31, 2020 and March 31, 2019, respectively.

All amounts have been paid and no further exit costs are expected to be incurred.

We have stopped presenting Cold Chain Packaging as a reportable segment, instead presenting the results of its operations as part of Corporate and Other, which aligns with Management's approach in evaluating the business.

GPT Acquisition

On October 31, 2019, we completed the acquisition of 100% of the outstanding shares of GPT, which has been accounted for as a new reportable segment - Biopharmaceutical Development.

The acquisition of GPT expands our presence into a new market--immunoassays and peptide synthesis solutions--that accelerate the discovery, development, and manufacturing of biotherapeutic drugs.

GPT systems include laboratory instruments, consumables, kits, and software that maximize laboratory productivity by miniaturizing and automating immunoassays at nanoliter scale.

Protein detection is used most frequently by pharmaceutical and biotech companies who are developing protein-based drugs.

This division also provides instruments, consumables, and software for the chemical synthesis of peptides from amino acids which are used in the discovery of new peptide-based drug therapies.

After adjustments, we paid cash consideration of $181,547 to the sellers in the transaction.

We used cash on hand to finance the acquisition, which we raised from an equity offering and a convertible debt issuance during the three months ended September 30, 2019.

The results of GPT have been included from November 1, 2019.

The acquisition was considered a stock purchase for tax purposes.

Preliminary Allocation of Purchase Price

We accounted for the GPT Acquisition as the purchase of a business under U.S.

Under the acquisition method of accounting, the assets of GPT will be recorded as of the acquisition date, at their respective estimated fair values, and consolidated with those of Mesa.

The estimated consideration and preliminary purchase price allocation has been prepared using a preliminary valuation.

We obtained the information used to prepare the preliminary valuation during due diligence and from other sources.

Only items identified as of the acquisition date are considered for subsequent adjustment.

The preparation of the valuation required the use of Level 3 inputs, which are subject to significant assumptions and estimates.

Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates.

These estimates were based on assumptions that we believe to be reasonable;

however, actual results may differ from these estimates.

We adjusted the preliminary allocation of the purchase price for the GPT acquisition during the three months ended March 31, 2020.

The significant items that changed were (1) inventory decreased $1,140 and we recorded a cumulative-effect release in cost of products sold of $834 and (2) customer relationship intangibles increased $42,873 and we recorded a cumulative-effect increase in amortization of intangibles acquired from a business combination of $1,706.

These adjustments have been reflected in the preliminary allocations of the purchase price.

The impacts of all adjustments have been reflected in the accompanying Consolidated Financial Statements as of and for the year ended March 31, 2020.

The final purchase price allocation will be completed within one year of the closing of the transaction, and may be refined further in the coming months as we learn more about GPT and therefore we can more accurately allocate the purchase price.

The following table summarizes the allocation of the preliminary purchase price:

Fair Value at October 31, 2019

October 31, 2019, 

we completed the acquisition of 

100 % of the outstanding shares of GPT, which comprises our newest reportable segment, Biopharmaceutical Development.

The acquisition of GPT expanded our presence into a new market, immunoassays and peptide synthesis solutions that accelerate the discovery, development, and manufacture of biotherapeutic drugs. GPT systems include laboratory instruments, consumables, kits, and software that maximize laboratory productivity by miniaturizing and automating immunoassays at the nanoliter scale.

GPT's protein detection is used most frequently by pharmaceutical and biotech companies that are developing protein-based drugs.

This division also provides instruments, consumables, and software for the chemical synthesis of peptides from amino acids which are used in the discovery of new peptide-based drug therapies. After adjustments, we paid cash consideration of $ 181,547  to the sellers in the transaction. The acquisition was considered a stock purchase for tax purposes. 

Fair Value of Net Assets Acquired

We accounted for the GPT Acquisition as the purchase of a business, and GPT's results of operations have been included in our consolidated statements of operations and cash flows from the date of acquisition. Under the acquisition method of accounting, the net assets of GPT were initially recorded as of the acquisition date at their respective estimated fair values using information obtained during due diligence and from other sources.

Subsequent to the closing of the transaction, we obtained additional information related to the facts and circumstances that existed at the acquisition date, and we refined our valuation models, assumptions, and inputs accordingly in order to more accurately estimate fair value for the purchase price allocation.

The preparation of the valuation required the use of Level 

3  inputs, which are subject to significant assumptions and estimates.

Critical estimates included, but were 

not  limited to, future expected cash flows, including projected revenues and expenses, and applicable discount rates. 

During the year ended March 31, 2021, we finalized the valuation of net assets acquired. The significant purchase price allocation changes during the year ended March 31, 2021 

a net decrease of $ 6,002  in the value of intangible assets; a decrease of $ 3,752  in the value of the inventory step-up; an increase of $ 878  in the value of property, plant and equipment, net;

and increases of $ 1,899  to other accrued expenses and $ 500  to accounts receivable, net related to GPT's sales tax obligations that were partially indemnified in our sale and purchase agreement.

See Note 15 .

 "Commitments and Contingencies" for more information on the sales tax liability.

We also made adjustments to deferred tax assets and deferred tax liabilities primarily due to the tax effect of the aforementioned changes to the purchase price allocation.

During year ended March 31, 2021, 

the cumulative net decrease to amortization expense recorded as a result of the decrease to intangible assets was $ 344 , which is comprised of a benefit of $ 522 recorded in general and administrative costs and $ 178  of expense recorded in cost of revenues. Additionally, a $ 207  cumulative increase to depreciation expense was recorded to general and administrative costs as a result of the increase in the fair value of property, plant and equipment. 

The cumulative impacts of all adjustments have been reflected in the consolidated financial statements as of and for the year ended March 31, 2021.

The components and allocation of the purchase price consist of the following amounts:

Cash and cash equivalents

Accounts receivable, net

Inventories, net

$ 4,654  

Accounts receivable

12,522  

Prepaid income taxes

Prepaid expenses and other

Property, plant and equipment, net

Deferred taxes

14,149  

Property, plant and equipment

Intangible assets:

Customer relationships

77,500  

Non-compete agreements

Acquired technology

11,800  

85,130  

Total Assets acquired

$ 220,487  

Accounts payable

Accrued salaries and payroll taxes

10,735  

Other short-term liabilities

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Deferred taxes

12,774  

Other long-term liabilities

Total liabilities assumed

$ 34,286  

Total closing amount, net of cash acquired

Accounts receivable is composed of trade accounts receivable, net, which is expected to be collected.

Finished goods inventory of GPT includes $11,818 of inventory-step up, which is required to report inventory at fair value at the time of acquisition.

These costs are being amortized to cost of products over approximately nine months following the acquisition date, which will result in a temporary reduction in gross profit for the business.

During the period from November 1, 2019 until March 31, 2020, we recorded $8,502 of amortization of inventory step-up costs in cost of products on the Consolidated Statements of Operations.

Customer relationships and acquired technology are currently expected to be amortized on a straight line basis over a 10 year period;

non-compete agreements are currently expected to be amortized over a five year period.

The weighted average useful life of intangibles acquired as part of the GPT acquisition is 9.9 years.

Amortization expense for customer relationships and non-compete agreements is being amortized to general and administrative expenses;

amortization expense for acquired technology is being recorded to cost of products.

During the period from November 1, 2019 until March 31, 2020, $3,742 of amortization expense was recorded to general and administrative costs and $314 of amortization expense was recorded to cost of goods sold and allocated to the Biopharmaceutical Development Division.

The estimated fair value of identifiable intangible assets was determined primarily using the income approach, which requires a forecast of all the expected future cash flows associated with the identified intangible assets.

Once our final valuation is complete, the amount of amortization expense will be trued up and amortization will be based on our final allocation.

Trademarks associated with this acquisition are considered indefinite-lived intangibles.

Acquired goodwill is allocated to the Biopharmaceutical Development reportable segment and represents the value expected to arise from organic revenues growth projections that are expected to exceed that of our legacy divisions, and the opportunity to expand into a new market with well-established market share.

The goodwill acquired is not deductible for income tax purposes.

The final purchase price allocation will be determined when we have completed the detailed valuations and necessary calculations.

The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.

The final allocation may include, but not be limited to:

(1) changes in allocations to intangible assets such as trade names, technology and customer relationships as well as goodwill (2) changes to inventory and (3) other changes to assets and liabilities.

Acquisition related costs of $1,399 for the year ended March 31, 2020 are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred and are reflected on the Consolidated Statements of Operations in general and administrative expenses.

$ 181,547  

(a) Accounts receivable is composed of trade accounts receivable, which is expected to be collected. 

GPT's finished goods inventory includes $ 8,066 of inventory-step up, which is required to be reported at fair value at the time of acquisition.

The inventory step-up was amortized to cost of revenues over approximately 

eight  months following the acquisition date, which resulted in a temporary reduction in gross profit for the business.

During the period from 

November 1, 2019 through March 31, 2020 ,  we recorded $ 8,502  of amortization of inventory step-up costs in cost of revenues on the Consolidated Statements of Income.

The final inventory valuation was completed during the year ended March 31, 2021 and was lower than our preliminary valuation, resulting in a cumulative effect decrease of $ 436  in amortization of inventory step-up costs. 

Customer relationships and acquired technology are being amortized on a straight-line basis over a 

10 -year period.

Amortization expense for customer relationships is recorded to general and administrative expenses;

amortization expense for acquired technology is recorded to cost of revenues.

During the year ended March 31, 2021, $ 7,487 of amortization expense related to the GPT intangible assets was recorded to general and administrative costs, and $ 1,430 of amortization expense was recorded to cost of goods sold and allocated to the Biopharmaceutical Development division, including the cumulative-effect benefit to amortization expense discussed above.

Trademarks associated with this acquisition are considered indefinite-lived intangibles. The estimated fair value of identifiable intangible assets was determined primarily using the income approach, which requires a forecast of all expected future cash flows associated with the identified intangible assets. 

Acquired goodwill of $ 85,130 , all of which is allocated to the Biopharmaceutical Development reportable segment, represents the value expected to arise from projected organic revenues growth that is expected to exceed that of our legacy divisions, and the value expected to arise from the opportunity to expand into a new market with well-established market share.

The goodwill acquired is 

not  deductible for income tax purposes.

Acquisition related costs of $ 1,399  for the year ended 

March 31, 2020 are not included as a component of consideration transferred but are expensed in the periods in which the costs are incurred and are reflected on the Consolidated Statements of Income in general and administrative expenses.

Unaudited Pro Forma Information

GPT's operations contributed $13,830 to revenues and ($7,433) of net loss to our consolidated results during the year ended March 31, 2020.

We included the operating results of GPT in our Consolidated Statements of Operations beginning on November 1, 2019, subsequent to the acquisition date.

The following pro forma financial information presents the combined results of operations of Mesa and GPT as if the acquisition had occurred on April 1, 2018 after giving effect to certain pro forma adjustments.

The pro forma adjustments reflected only include those adjustments that are directly attributable to the GPT Acquisition, factually supportable and have a recurring impact;

they do not reflect any adjustments for anticipated expense savings resulting from the acquisition and are not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on April 1, 2018 or of future results.

GPT's operations contributed $ 33,892 to revenues and ($ 9,006 ) of net loss to our consolidated results during the year ended March 31, 2021, including cumulative-effect adjustments. The loss includes over $ 8,900  in amortization of intangibles acquired in a business combination and over $ 3,000 of realized and unrealized losses on foreign currency.

We included the operating results of GPT in our Consolidated Statements of Income beginning November 1, 2019, immediately subsequent to the acquisition date.

The following pro forma financial information presents the combined results of operations of Mesa Labs and GPT as if the acquisition had occurred on April 1, 2018, after giving effect to certain pro forma adjustments.

The pro forma adjustments reflected include only those adjustments that are factually supportable and directly attributable to the GPT Acquisition and that have a recurring impact;

or of future results.

Year Ended March 31,

Pro forma total revenues (1)

Pro forma net income (loss) (2)

(1) Net revenues were adjusted to include net revenues of GPT.

(2) Pro forma adjustments to net earnings attributable to Mesa include the following:

Excludes acquisition-related transaction costs incurred in the year ended March 31, 2020.

$ 136,792  

$ 134,843  

Pro forma net income (2)

18,953  

( 1 ) Net revenues were adjusted to include net revenues of GPT. 

( 2 ) Pro forma adjustments to net earnings attributable to Mesa Labs include the following:

Excludes acquisition-related transaction costs incurred in the year ended March 

Excludes interest expense attributable to GPT's external debt that was paid off as part of the acquisition.

Additional amortization expense of $9,774 for each of the years ended March 31, 2020 and March 31, 2019 based on the adjusted fair value of amortizable intangible assets acquired.

Additional charge to cost of revenues of $11,818 was included in the year ended March 31, 2019 based on the step up value of inventory.

$8,502 was excluded from the year ended March 31, 2020 based on the step up value of inventory which would have been included and fully amortized within the first year of the acquisition.

Removal of non-cash impairment of goodwill in the amount of $20,676 recorded during GPT's fiscal year ended December 31, 2018, which would not have been taken had the acquisition occurred on January 1, 2018.

Total GPT amortization expense of $ 8,930  for each of the years ended March 31, 2020 

and March 31, 2019 

based on the adjusted fair value of amortizable intangible assets acquired.

Additional charge to cost of revenues of $ 8,066 included in the year ended March 31, 2019 

based on the step-up value of inventory.

$ 8,596  was excluded from the year ended March 31, 2020 based on the step-up value of inventory which would have been included and fully amortized within the first year of the acquisition.

Additional stock-based compensation expense representing expense for performance share units awarded to certain key GPT employees.

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IBP Acquisition

During the year ended March 31, 2020, we allocated the purchase price according to the fair value of assets acquired and liabilities assumed using information obtained during due diligence and through the use of financial and other information available to us.

Fair value of the assets and liabilities acquired was determined using Level 3 inputs (unobservable inputs) based on a discounted cash flow method.

Under the terms of the IBP agreement, we are required to pay contingent consideration if the company is able to achieve certain regulatory milestones.

The potential undiscounted consideration payable ranges from $0 to $490, depending on whether units being developed are certified for sale by U.S.

and foreign regulatory bodies.

We currently believe that it is more likely than not that all aspects of the contingency will be achieved and as part of purchase accounting, we recorded $490 of contingent consideration payable on the Consolidated Balance Sheets, which is our estimate of the amount that will be paid.

Any changes to the contingent consideration ultimately paid will result in additional income in our Consolidated Statements of Operations.

Dissolution of Packaging Division

During the year ended March 31, 2019, we made the decision to exit the packaging business (the Cold Chain Packaging Reportable Segment) by or before March 31, 2020 because it has historically been our least profitable segment and was no longer aligned with our long-term strategic goals.

During the year ended March 31, 2020, we stopped providing consulting services, and we stopped seeking or accepting new customers.

We reduced the division's costs by relocating most of the administrative functions to our headquarters in Lakewood, Colorado, and eliminating the division's sales force.

Throughout the year ended March 31, 2020, we assisted our customers in transitioning their business to other packaging vendors and we stopped purchasing new inventory.

We substantially completed liquidating our inventory and exiting the business during the third quarter of our fiscal year 2020.

As a result of completing our final sales in the division, we wrote off the remaining value of intangibles and goodwill, resulting in a charge to impairment of goodwill and long-lived assets of $276.

We incurred $51 and $150 of severance and facility closure expenses during the years ended March 31, 2020 and March 31, 2019, respectively.

All amounts have been paid and no further exit costs are expected to be incurred.

Additionally, during the year ended March 31, 2020, we released $187, the balance of currency translation adjustment, from equity into other (income) expense, net on the Consolidated Statements of Operations.

Disposal of the Packaging Division reportable segment represents a strategic shift in our business;

however, since the division represents our smallest reportable segment with no major effect on our operations or financial results, we have not accounted for the exit as a discontinued operation.

Beginning with this annual report, we have stopped presenting Cold Chain Packaging as a reportable segment, instead presenting the results of it operations as part of Corporate and Other, which aligns with Management's approach in evaluating the business.

Inventories consist of the following:

On April 1, 2019, we completed a business combination (the “IBP Acquisition”) whereby we acquired all of the common stock of IBP Medical GmbH, a company whose business manufactures medical meters used to test various parameters of dialysis fluid (dialysate) and the proper calibration and operation of dialysis machines. During the year ended March 31, 2020, we allocated the purchase price according to the fair value of assets acquired and liabilities assumed using information obtained during due diligence and through the use of financial and other information available to us.

Fair value of the assets and liabilities acquired was determined using Level 3 inputs (unobservable inputs) based on a discounted cash flow method. 

Under the terms of the IBP agreement, as amended, we are required to pay contingent consideration if the company is able to achieve certain development and regulatory milestones.

During the year ended March 31, 2021, we paid $ 296 in conjunction with IBP's attainment of two  of the milestones.

We expect that IBP will achieve its final two milestones during the three months ending June 30, 2021, and we will pay approximately $ 237 to fulfill our obligation under the contingent consideration arrangement.

Inventories consisted of the following:

March 31, 2021

1 unchanged sentence

Raw materials

$ 5,755  

$ 4,738  

Work in process

1 unchanged sentence

Inventories, net

As of March 31, 2020, finished goods inventory includes $2,901, which is the remaining balance of the adjustment to step up inventory acquired as part of the GPT Acquisition to fair value, see Note 4.

"Significant Transactions."

$ 11,178  

$ 14,230  

The remaining balance of the adjustment to step up inventory acquired in the GTP Acquisition to fair value, which was included in finished goods, was $ 0  and $ 2,901 , respectively, as of 

March 31, 2021 and 

March 31, 2020; 

"Significant Transactions." 

Property, Plant and Equipment

2 unchanged sentences

March 31, 2020

18,857  

18,880  

Manufacturing equipment

12,163  

Computer equipment

Construction in progress

38,328  

34,807  

Accumulated depreciation

( 16,330 )  

Property, plant and equipment, net

Depreciation expense for the years ended March 31, 2020 , 2019 and 2018 was $2,234, $2,338, and $2,542 respectively.

As of March 31, 2020, we have operating leases for buildings, warehouses, and office equipment.

Our operating lease right of use ("ROU") assets and liabilities increased significantly during the year ended March 31, 2020 because of the GPT Acquisition described in Note 4.

"Significant Transactions." We accounted for the four property leases acquired as part of our acquisition of GPT by measuring the lease liability at the present value of the remaining lease payments as if the acquired lease were a new lease for Mesa.

The following table presents the lease balances within the Consolidated Balance Sheets related to our operating leases as of March 31, 2020:

$ 21,998  

$ 22,066  

During the year ended March 31, 2021, as part of the finalization of the purchase price adjustment of GPT, we recorded an increase of $ 878  in the value of property, plant and equipment, net.

Depreciation expense for the years ended March 31, 2021 , 

2020 and 

2019 was $ 2,959 , $ 2,234 , and $ 2,338 respectively.

We have operating leases for buildings and office equipment. The following table presents the lease balances within the Consolidated Balance Sheets related to our operating leases:

Lease Assets and Liabilities

1 unchanged sentence

March 31, 2021

March 31, 2020

Operating lease ROU asset

$ 1,801  

$ 2,480  

Current operating lease liabilities

2 unchanged sentences

Other long-term liabilities

Lease term and discount rates were as follows as of March 31, 2020:

March 31, 2020

Weighted average remaining lease term in years

Weighted average discount rate

The components of lease costs were as follows:

The components of lease costs, the weighted average remaining lease term and the weighted average discount rate were as follows:

Year Ended March 31,

Operating lease expense

$ 1,130  

Variable lease expense

Total lease expense

Supplemental cash flow information related to leases were as follows:

$ 1,402  

$ 1,055  

Weighted average remaining lease term in years

Weighted average discount rate

Supplemental cash flow information related to leases was as follows:

Year Ended March 31,

Cash paid for amounts included in the measurements of lease liabilities

$ 1,192  

Operating lease assets obtained in exchange for operating lease obligations

Maturities of lease liabilities were as follows as of March 31, 2020:

Maturities of lease liabilities are as follows as for the years ending March 31:

$ 1,055  

Future value of lease liabilities

1 unchanged sentence

Present value of lease liabilities

$ 1,700  

Goodwill and Long-Lived Assets

Goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired, less assumed liabilities.

We assess the goodwill of each of our reporting units for impairment at least annually during the fourth quarter of our fiscal year and as triggering events occur that indicate that it is more likely than not that an impairment exists.

We begin by performing the qualitative goodwill assessment, and if the results of that test indicate a possible impairment in any of our reportable units, then we perform a quantitative goodwill impairment test on the reporting unit.

When we perform a quantitative impairment test, we estimate the fair value of the reporting unit using the income approach.

Under the income approach, fair value is estimated as the present value of estimated future cash flows of each reporting unit.

The projected cash flows incorporate various assumptions related to weighted average cost of capital, growth rates specific to the reporting unit, assumptions for net sales growth, and terminal growth rates.

In conjunction with our exit from the Cold Chain Packaging business, we impaired $296 of remaining goodwill and long-lived assets pertaining to the reporting unit during the year ended March 31, 2020.

During the year ended March 31, 2019, we determined that the long-lived assets and goodwill associated with our Cold Chain Packaging reporting segment were impaired and we recognized a non-cash impairment charge of $1,075 on goodwill, $3,378 on long-lived intangible assets, and $229 on property plant and equipment, which is recorded in impairment loss on goodwill and long-lived assets on the accompanying Consolidated Statements of Operations.

The impairment was triggered by the reportable segment having financial results that fell short of expectations due to rising commodity costs of the segment's principal raw materials, which eroded gross margins, as well as the division's largest customer giving notice that it was terminating its contract with us.

The goodwill activity related to that business is now presented in Corporate and Other.

Goodwill arises from the excess purchase price of acquired businesses over the fair value of acquired tangible and intangible assets, less assumed liabilities.

We assess the goodwill of each of our reporting units for impairment at least annually during the fourth quarter of our fiscal year and as triggering events occur that indicate it may be more likely than not that an impairment exists.

We begin by performing a qualitative goodwill assessment, and if the results of that test indicate it is more likely than not an impairment exists for any reporting unit, we then perform a quantitative goodwill impairment test on the reporting unit.

When we perform quantitative impairment tests, we estimate the fair value of the reporting unit using the income approach.

Under the income approach, fair value is estimated as the present value of the reporting unit's estimated future cash flows.

The change in the carrying amount of goodwill was as follows:

4 unchanged sentences

March 31, 2019

$ 29,780  

$ 18,235  

$ 18,103  

66,377  

Effect of foreign currency translation

( 186 )  

( 20 )  

( 2,446 )  

77,162  

78,070  

( 258 )  

March 31, 2020

29,594  

19,123  

$ 74,716  

$ 18,103  

$ 141,536  

Effect of foreign currency translation

10,715  

11,337  

Goodwill adjustment related to GPT acquisition

March 31, 2021

Other intangible assets are as follows:

$ 30,153  

$ 19,186  

$ 93,399  

$ 18,103  

$ 160,841  

Other intangible assets were as follows:

March 31, 2021

7 unchanged sentences

Intellectual property

$ 21,201  

$ ( 8,595 )  

$ 12,606  

$ 15,731  

$ ( 6,454 )  

$ 9,277  

( 3,129 )  

( 2,855 )  

Customer relationships

145,754  

( 52,206 )  

93,548  

146,106  

( 38,777 )  

107,329  

Non-compete agreements

Trade names initially valued at $2,321 that were acquired as part of the GPT acquisition are considered to be indefinite-lived and are not subject to amortization.

The range of useful lives as well as the weighted-average remaining useful lives of amortizable intangible assets as of March 31, 2020 are as follows:

Estimated Useful Life (Years)

Weighted Average Remaining Life (Years)

( 1,195 )  

( 1,166 )  

$ 176,866  

$ ( 65,125 )  

$ 111,741  

$ 169,123  

$ ( 49,252 )  

$ 119,871  

The increase in the carrying amount of intangible assets was attributable to changes in foreign currency and adjustments to the preliminary purchase price of GPT that are discussed further in Note 4 .

 "Significant Transactions." We acquired trade names as part of the GPT acquisition, which are valued at $ 4,990  as of March 31, 2021 and are considered to be indefinite lived.

As these trade names are not subject to amortization, they are tested for impairment at least annually or more frequently if triggering events indicate it may be more likely than not that an impairment exists. 

The range of useful lives and weighted-average remaining useful lives of amortizable intangible assets as of March 31, 2021 were as follows: 

Weighted Average

Estimated Useful Life

Remaining Life

Intellectual Property

10 - 15  

5 - 10  

Customer Relationships

5 - 10  

Non-compete Agreements

The increase in intangible assets during the year ended March 31, 2019 is related to the acquisitions of IBP and GPT.

"Significant Transactions" for more information.

5 - 10  

The following is estimated amortization expense for the years ending March 31:

Amortization expense of intangibles acquired in a business combination for the years ended March 31, 2020 , 2019 and 2018 was $10,637, $7,090, and $6,929, respectively.

$ 14,930  

14,721  

14,206  

12,612  

11,824  

Amortization expense of intangibles acquired in a business combination for the years ended 

March 31, 2021 , 

2020 and 

2019 was $ 14,513 , $ 10,637 , and $ 7,090 respectively.

Supplemental Balance Sheets Information

3 unchanged sentences

Bonus payable

$ 3,504  

$ 4,069  

Wages payable

Payroll taxes

Payroll related taxes

Other benefits payable

Total accrued payroll and benefits

Other accrued expenses consist of the following:

$ 9,388  

$ 8,940  

Other accrued expenses consisted of the following:

March 31, 2021

1 unchanged sentence

Accrued business taxes

Current lease liabilities

$ 4,749  

$ 3,555  

Current operating lease liabilities

Interest payable

Professional services fees

Contingent consideration

Total other accrued expenses

During the year ended March 31, 2020, we paid off the balance of our $20,000 term loan and our line of credit and terminated our $80,000 revolving line of credit.

We recorded the balance of our unamortized debt discount in the amount of $238 to interest expense and amortization of debt discount on the Statements of Operations in conjunction with the extinguishment of the term loan.

On August 12, 2019, we issued the Notes, which consist of an aggregate principal amount of $172,500 of convertible senior notes which includes the underwriters' exercise in full of an option to purchase an additional $22,500.

The net proceeds of the Notes Offering, after deducting underwriting discounts and commissions and other related offering expenses payable, were approximately $167,070.

The Notes mature on August 15, 2025, unless earlier repurchased or converted and bear interest at a rate of 1.375% payable semi annually in arrears on February 15 and August 15 of each year beginning on February 15, 2020.

The Notes are initially convertible at a conversion rate of 3.5273 shares of the common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $283.50 per share of common stock.

$ 8,297  

$ 6,605  

Credit Facility

On March 5, 2021, we entered into a four -year senior secured credit agreement that includes 1 ) a revolving credit facility in an aggregate principal amount of up to $ 75,000 , 2 ) a swingline loan in an aggregate principal amount not exceeding $ 5,000 , and 3 ) letters of credit in an aggregate stated amount not exceeding $ 2,500 at any time. The Credit Facility also provides for an incremental term loan or an increase in revolving commitments in an aggregate principal amount of at a minimum $ 25,000 and at a maximum $ 75,000 , subject to the satisfaction of certain conditions and lender considerations (together, the available facilities are referred to as the "Credit Facility").

The Credit Facility bears interest at either a base rate or a Eurodollar rate, plus an applicable spread.

We have recorded customary lender fees totaling $ 664  within prepaid expenses and other and other assets on the Consolidated Balance Sheets.

The fees are being expensed on a straight line basis over the life of the agreement. 

The most restrictive financial covenants include a maximum leverage ratio of 5.50 to 1.00 for the first four testing dates on which the line of credit is outstanding;

5.0 to 1.0 on each of the fifth, sixth, seventh, and eighth testing dates;

and 4.5 to 1.0 on each testing date following the eighth testing date, except that we may have a leverage ratio of 5.75 to 1.0 for a period of four consecutive quarters following a permitted acquisition.

The Credit Agreement also stipulates a minimum fixed charge coverage ratio of 1.25 to 1.0.

Other covenants include restrictions on our ability to incur debt, grant liens, make fundamental changes, engage in certain transactions with affiliates, or conduct asset sales.

As of March 31, 2021, we were in compliance with all required covenants.

As of and throughout the year ended March 31, 2021, we had no outstanding balance under the Credit Agreement.

Convertible Notes

On August 12, 2019, we issued an aggregate principal amount of $ 172,500 of convertible senior notes (the “Notes).

Net proceeds after deducting underwriting discounts and commissions and other related offering expenses payable approximated $ 167,070 .

The Notes mature on August 15, 2025, unless earlier repurchased or converted, and bear interest at a rate of 1.375 % payable semi-annually in arrears on February 15 and August 15 of each year beginning February 15, 2020. 

The Notes are initially convertible at a rate of 

3.5273  shares of common stock per 

$1,000  principal amount of Notes, which is equivalent to an initial conversion price of approximately $ 283.50  per share of common stock.

Noteholders may convert their Notes at their option only in the following circumstances:

(i) during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price per share of our common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(ii) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(iii) upon the occurrence of certain corporate events or distributions on our common stock, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets;

and (iv) at any time from, and including, April 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.

(i) during any calendar quarter commencing after the calendar quarter ending December 

31, 2019 (and only during such calendar quarter), if the last reported sale price per share of 

our common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(ii) during the five consecutive business days immediately after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(iii) upon the occurrence of certain corporate events or distributions on our common stock, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the Notes) or a transaction resulting in the Company’s common stock converting into other securities or property or assets;

and (iv) at any time from, and including, April 

15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election.

Our current intent is to settle conversions entirely in shares of common stock.

We will reevaluate this policy from time to time as conversion notices are received from holders of the Notes.

The circumstances required to allow the holders to convert their Notes were not met during the year ended March 31, 2020.

As of March 31, 2020, the if-converted value of the Notes did not exceed the principal balance.

If a fundamental change occurs prior to the maturity date, holders may require us to repurchase all or a portion of their Notes for cash at a price equal to 100% of the principal amount of the Notes to be repurchased plus unpaid accrued interest.

Holders of Notes who convert their Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the Notes.

As of March 31, 2020, the conditions allowing holders of the Notes to convert have not been met and therefore, the notes are not yet convertible and are recorded as a long-term liability on our Consolidated Balance Sheets as of March 31, 2020.

We accounted for the transaction by bifurcating the Notes into liability and equity components.

The carrying amount of the liability component was $141,427 upon issuance and was calculated by using the income approach and measuring the fair value of a similar debt instrument that does not have an associated convertible feature.

The implied interest rate (a Level 3 unobservable input) assuming no conversion option was estimated using the Tsiveriotis-Frenandes model;

all other assumptions used in measuring the fair value represent what market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs.

The carrying amount of the equity component representing the conversion option was $31,073 and was determined by deducting the fair value of the liability component from the par value of the Notes.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount (the "Debt Discount") will be amortized to interest expense using the effective interest method over the six-year contractual term of the Notes.

Debt issuance costs related to the Notes comprised of discounts and commissions payable to the initial purchasers of $5,175 and third party offering costs of $255.

We allocated the total amount incurred to the liability and equity components of the Notes based on their relative values.

Issuance costs attributable to the liability component were $4,452 and will be amortized to interest expense using the effective interest method over the contractual term.

Issuance costs attributable to the equity component were netted with the equity component in stockholders’ equity.

The net carrying amount of the Notes were as follows:

We will reevaluate this policy from time to time as we receive conversion notices from noteholders.

If a fundamental change occurs prior to the maturity date, holders may require us to repurchase all or a portion of their Notes for cash at a price equal to 

100 % of the principal amount of the Notes to be repurchased plus unpaid accrued interest.

Noteholders who convert their Notes in connection with a notice of a redemption or a make-whole fundamental change may be entitled to a premium in the form of an increase in the conversion rate of the Notes.  

The circumstances required to allow noteholders to convert their Notes were met once during year ended March 31, 2021;

however, none of the note holders exercised their option to convert.

As of March 31, 2021, the Notes were not convertible as the circumstances for conversion were not satisfied on that date, thus classification of the Notes as a long-term liability on our Consolidated Balance Sheets as of March 31, 2021 remains appropriate.

The if-converted value of the Notes did not exceed the principal balance as of March 31, 2021.

We accounted for the issuance of the Notes by bifurcating the Notes into liability and equity components.

The carrying amount of the liability component was $ 141,427 upon issuance as calculated by measuring the fair value of a similar debt instrument that does 

not  have an associated convertible feature using the income approach.

The implied interest rate (a Level 3 unobservable input) assuming no conversion option was estimated using the Tsiveriotis-Fernandez model;

all other assumptions used in measuring the fair value represent factors market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs.

The carrying amount of the equity component, representing the value of the conversion option, was $ 31,073 and was determined by deducting the fair value of the liability component from the par value of the Notes.

The equity component is not remeasured provided it continues to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount (the debt discount) is being amortized to interest expense using the effective interest method over the six -year contractual term of the Notes.

Debt issuance costs related to the Notes include discounts and commissions payable to the initial purchasers of $ 5,175  and third party offering costs of $ 255 .

We allocated the total amount incurred to the liability and equity components of the Notes based on their relative values.

Issuance costs attributable to the liability component were $ 4,452  and will be amortized to interest expense using the effective interest method over the contractual term.

Issuance costs attributable to the equity component were netted with the equity component in stockholders’

The net carrying amount of the Notes was as follows:

March 31, 2021

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Principal outstanding

$ 172,500  

Unamortized debt discount

( 23,497 )  

Unamortized debt issuance costs

( 3,328 )  

Net carrying value

The net carrying amount of the equity component of the Notes were as follows:

$ 145,675  

$ 140,278  

The net carrying amount of the equity component of the Notes was as follows:

March 31, 2021

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Amount allocated to conversion option

$ 31,073  

allocated issuance costs and deferred taxes

( 8,338 )  

Equity component, net

$ 22,735  

We recognized interest expense on the Notes as follows:

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Coupon interest expense at 1.375%

$ 2,372  

$ 1,502  

Amortization of debt discounts and issuance costs

$ 7,769  

$ 4,816  

The effective interest rate of the liability component of the note is approximately 5.5 %.

See "Recently Issued Accounting Pronouncements" in Note 1.

"Description of Business and Summary of Significant Accounting Policies" for the impact our anticipated April 1, 2021 adoption of ASU 2020 - 06 is expected to have with respect to the Notes. 

Stock Transactions and Stock-Based Compensation

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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 .

Shares of common stock repurchased 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, 2021 , 

2020 and 

As of March 31, 2021 , 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 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 Offerings of Common Stock 

On June 12, 2020, we completed the sale and issuance of a total of 600,000 shares of our common stock and on June 19, 2020, our underwriters exercised in full their option to purchase an additional 90,000 shares of our common stock.

The offering price to the public was $ 225.00 per share.

The total proceeds we received from the offering, net of underwriting discounts and commissions and other offering expenses we paid, was $ 145,935 .

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 

56,250 additional 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.

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.

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 44,039 shares were available for future grants as of March 31, 2021 .

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Year Ended March 31,

Stock-based compensation expense (A)

Stock-based compensation expense

$ 9,268  

$ 5,525  

$ 4,212  

Amount of income tax (benefit) recognized in earnings

( 1,816 )  

( 1,576 )  

Stock-based compensation expense, net of tax

(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.

$ 7,452  

$ 3,949  

$ 1,842  

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:

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: 

Risk-free interest rate

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Weighted-average Black-Scholes fair value per share at date of grant

$ 67.66  

$ 66.02  

$ 54.02  

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 majority of options granted during the year ended March 31, 2021 vest equally on the first, second, and third  anniversary of the grant date. 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 option activity under The 2006 Equity Compensation plan and The 2014 Equity Plan as of March 31, 2021, and changes for the year then ended are presented below (shares and dollars in thousands, except per-share data):

Stock Options

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Outstanding at March 31, 2020

$ 107.72  

33,927  

Awards granted

226.72  

Awards forfeited or expired

( 13 )  

115.23  

Awards exercised or distributed

( 56 )  

Outstanding as of March 31, 2021

$ 129.55  

$ 28,856  

Exercisable as of March 31, 2021

$ 102.31  

$ 17,155  

Vested and expected to vest, March 31, 2021

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.

$ 132.59  

$ 28,847  

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

March 31, 2021 , 

2020 and 

2019 was $ 9,559 , $ 9,574 , and $ 10,895 , respectively.

Unrecognized stock-based compensation expense for stock options as of 

March 31, 2021 was $ 3,758  and is expected to be recognized over a weighted average period of 2.2  years.

The total fair value of options vested was $ 2,005 , $ 1,912 , and $ 2,400 during the years ended March 31, 2021 , 

2020 and 

2019 , respectively.

The weighted-average grant price of awards granted during the years ended March 31, 2020 

and March 31, 2019 

was $ 206.35  and $ 144.96 , respectively.

Time-Based Restricted Stock Units (RSUs)

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Nonvested at March 31, 2020

$ 180.15  

$ 6,258  

Awards granted

231.61  

Awards forfeited or expired

204.30  

Awards distributed

( 10 )  

189.01  

Nonvested as of March 31, 2021

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 .

$ 206.56  

$ 8,948  

There were 34  RSUs with a weighted average grant date fair value per share of $ 206.30  that are expected to vest as of March 31, 2021 .

For the years ended March 31, 2020 

and 2019, the weighted average fair value per RSU granted was $ 213.31  and $ 157.14 , respectively.

Unrecognized stock-based compensation expense for RSUs that we have determined are probable of vesting was $ 4,396  as of March 31, 2021 .

The total fair value of RSUs vested was $ 1,819 , $ 959 , and $ 460 during the years ended March 31, 2021 , 

2020 and 

Performance-Based Restricted Stock Units (PSUs)

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Aggregate Intrinsic Value

Nonvested at March 31, 2019

Awards granted

Awards forfeited or expired

Awards distributed

Nonvested as of March 31, 2020

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;

Nonvested at March 31, 2020 at target

$ 204.68  

$ 4,903  

Awards forfeited or expired at target

228.27  

Nonvested as of March 31, 2021 at target

$ 207.88  

$ 4,884  

Expected to vest

$ 195.78  

For the year ended March 31, 2020, and March 31, 2019, the average fair value per PSU granted was $ 215.47 and $ 192.99 .

Unrecognized stock-based compensation expense for PSUs that we have determined probable of vesting was $ 841  as of March 31, 2021 

and is expected to be recognized over a weighted average period of 0.6 years.

No PSUs were distributed during the years ended March 31, 2021, March 31, 2020, or 

March 31, 2019. 

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").

Originally, 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 would range from 0 % to 150 % of the targeted number of shares;

if financial performance is less than 90 % of targets, then no shares would vest.

During the year ended March 31, 2021, our Compensation Committee modified the performance targets for these grants, and as a result, they will vest at 60 % of the modified performance target.

We recorded the change to the performance target as a modification of the award, resulting in $ 432  of expense recorded during the three months ended March 31, 2021 and we expect to record an additional $ 18 of expense during the three months ending June 30, 2021.

We expect to issue 2 shares to recipients of GPT PSUs during the three months ending June 30, 2021. 

During the year ended March 31, 2020, we awarded 8 PSUs (the "FY 20  PSUs") that are subject to both service and performance conditions to eligible employees.

The FY 20  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 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.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period.

Diluted earnings (loss) per share (“diluted EPS”) is computed similarly to basic earnings (loss) 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 RSUs (collectively “stock awards”).

During the year ended March 31, 2021, we adjusted our estimate of the FY 20  PSUs that we expect to vest based on results achieved and expected to be achieved and we recorded total cumulative effect catch-ups of $ 394  ($ 290  after taxes and $ 0.06 per basic and diluted share). As a result of our new estimate of achievement against our performance targets, we expect expense associated with the FY 20  PSUs that are expected to vest to be approximately $ 95  per quarter.

During the year ended March 31, 2019, 

we awarded 11 PSUs (the "FY19  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.

Subject to final adjustments, we expect to issue 27  shares under the FY 19  PSUs plan based on actual performance results.

During the year ended March 31, 2021, we recorded net cumulative effect true ups of $ 997 ($ 734  net of tax and $ 0.15 and $ 0.14  per basic and diluted share, respectively) related to the FY19  PSUs.

During the three months ending June 30, 2021, 

we expect to record an additional $ 364  of expense representative of the ongoing service element of the award.

Earnings 

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 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 RSUs (collectively “stock awards”) and convertible debt.

Stock awards are excluded from the calculation of diluted EPS in the event that they are subject to performance conditions that have not yet been achieved or are antidilutive.

Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect.

There was no dilution in our diluted EPS calculation for the year ended March 31, 2018 because we incurred a net loss and the effect would have been antidilutive.

The impact of the assumed conversion of the Notes calculated under the if-converted method was anti-dilutive, and as such shares underlying the Notes were excluded from the diluted EPS calculation for the year ended March 31, 2020.

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

Year Ended March 31,

Net income (loss) available for shareholders

Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect. 

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

For the Year Ended March 31,

Net income available for shareholders

$ 3,274  

$ 1,778  

$ 7,484  

Weighted average outstanding shares of common stock

Dilutive effect of stock options

Dilutive effect of non-vested shares

Dilutive effect of RSUs

Dilutive effect of PSUs

Fully diluted shares

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

Year Ended March 31,

Basic earnings per share

$ 0.66  

$ 0.42  

$ 1.95  

Diluted earnings per share

$ 0.64  

$ 0.41  

$ 1.86  

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

For the Year Ended March 31,

Assumed conversion of convertible debt

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401 (K) Retirement Plan effective January 1, 2000.

We match 100% of the first 4% of pay contributed by each eligible employee and contributions are vested immediately.

Participation is voluntary, and employees are eligible the first day of the month following their start date.

We contributed $661, $663, and $680, respectively, to the plan for the years ended March 31, 2020 , 2019 and 2018 .

Under this plan, we match 100 % of the first 4 % of pay contributed by each eligible employee, and contributions vest immediately. Participation is voluntary, and employees are eligible on the first day of the month following their start date.

For certain GPT subsidiaries, we have maintained the terms of the 401 (K) plan that was in effect for the business immediately prior to acquisition.

Under this plan, we match 100 % of the first 6 % of pay contributed by each eligible employee, and contributions vest over three years. For the years ended March 31, 2021 , 

2020 and 

2019 , respectively, we contributed $ 935 , $ 661 , and $ 663 to 401 (K) retirement plans on behalf of employees.

Earnings before income taxes are as follows:

Year Ended March 31,

$ 6,297  

$ 16,059  

$ 12,133  

( 3,994 )  

( 12,197 )  

Total earnings before income taxes

$ 2,303  

$ 3,862  

$ 8,623  

The components of our provision for income taxes are as follows:

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Current tax provision

$ 1,500  

$ 2,348  

$ 1,831  

Total current tax expense

Deferred tax provision:

Total deferred tax expense

Total income tax expense

( 2,410 )  

( 619 )  

( 474 )  

( 2,730 )  

Total deferred tax benefit

( 3,503 )  

( 2,071 )  

Total income tax (benefit) expense

$ ( 971 )  

$ 2,084  

$ 1,139  

The components of net deferred tax assets and liabilities are as follows:

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Deferred tax assets:

Accrued employee-related expenses

Allowances and reserves

Stock compensation deductible differences

Net operating loss

Foreign tax credit

$ 8,990  

Stock compensation deductible differences

Allowances and reserves

Accrued employee-related expenses

Total deferred tax assets

13,801  

11,461  

Deferred tax liabilities:

Property, plant and equipment

Goodwill and intangible assets

Currency translation adjustment

( 23,029 )  

( 4,723 )  

Property, plant and equipment

( 1,275 )  

( 29 )  

Total deferred tax liabilities

( 29,056 )  

Valuation allowance

Net deferred tax asset (liability)

( 404 )  

Net deferred tax liability

$ ( 15,659 )  

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:

1 unchanged sentence

Federal income taxes at statutory rates

$ 1,811  

State income taxes, net of federal benefit

( 221 )  

Tax benefit of stock option exercises

Section 199 manufacturing deduction

( 1,816 )  

( 1,576 )  

Foreign-derived intangible income deduction  

( 999 )  

Research and development credit

Tax Cuts and Jobs Act

Impairment of non-deductible goodwill

( 165 )  

( 191 )  

Limitation for 162(m)

Foreign rate differential

Total income tax expense

Foreign rate differential  

( 176 )  

Total income tax (benefit) expense

$ ( 971 )  

$ 2,084  

$ 1,139  

We or one of our subsidiaries files income tax returns in the U.S.

federal jurisdiction and various state and foreign jurisdictions.

Our federal tax returns for all years after 2016, state tax returns after 2015 and foreign tax returns after 2015 are subject to future examination by tax authorities for all our tax jurisdictions.

Although the outcome of tax audits, if any, is always uncertain, we believe that we have adequately accrued for all amounts of tax, including interest and penalties and any adjustments that may result.

We recognize interest and penalties related to unrecognized tax benefits in other expense and general and administrative expense, respectively.

Accrued interest and penalties related to unrecognized tax benefits were $19, $40 and $24 as of March 31, 2020 , 2019 and 2018 , respectively.

A reconciliation of the changes in the balance of unrecognized tax benefit amounts is as follows:

Our federal tax returns for all years after 2017, state tax returns after 2016  and foreign tax returns after 2016  are subject to future examination by tax authorities for all our tax jurisdictions.

December 31, 

2018  for Gyros US, Inc., and its subsidiary (together "Gyros U.S."), which we acquired as part of the GPT Acquisition, is under examination by the IRS.

Additionally, the tax year ended March 31, 2019 for Mesa Laboratories, Inc.

is under review by the IRS.

We expect the examinations for these tax years to be completed during the year ending March 31, 2022.

We recognize interest and penalties related to unrecognized tax benefits in other expense and general and administrative expense, respectively. Accrued interest and penalties related to unrecognized tax benefits were $ 0 , $ 19  and $ 40 as of March 31, 2021 , 

2020 and 

2019 , respectively.

A reconciliation of the changes in the balance of unrecognized tax benefit amounts is as follows:

Year Ended March 31,

Beginning balance

$ 1,361  

Decreases related to prior period tax positions

( 629 )  

( 1,027 )  

Increases related to current period tax positions

Ending balance

We expect that the amount of unrecognized tax benefits will change in the next 12 months;

$ 1,361  

During the year ended March 31, 2021, we recorded an income tax benefit of approximately $ 630 , including interest, related to our foreign-derived intangible income deduction recognition based on updated Treasury Regulations, and application of those regulations to our operations, which reduced the effective tax rate by 6.0 %.

The remaining amount of tax benefits that, if recognized, would affect the effective tax rate was $ 64 as of March 31, 2021, excluding interest and penalties.

We expect that the remaining amount of unrecognized tax benefits will change in the next 12 months;

however, we do not expect the change to have a significant impact on our consolidated statements of operations or consolidated balance sheets.

At this time, we expect resolution of the uncertain tax position within 12 months.

As of March 31, 2020 , undistributed earnings of our foreign subsidiaries amounted to $12,900.

As of March 31, 2021 , and March 31, 2020, respectively, undistributed earnings of our foreign subsidiaries amounted to $ 9,951 and $ 12,900 , respectively.

Those earnings are considered indefinitely reinvested and, accordingly, no U.S.

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tax liability.

Furthermore, as a result of the Tax Cuts and Job Act, a significant portion of the distribution may not be subject to current U.S.

income taxes, resulting in no foreign tax credits.

As of March 31, 2020 , we had $8,874 of net operating losses for foreign tax purposes.

Furthermore, as a result of the Tax Cuts and Job Act, a significant portion of the distribution may 

not be subject to current U.S.

income taxes, resulting in no foreign tax credits. 

As of March 31, 2021 , we had $27,547 of gross net operating losses for foreign tax purposes.

The foreign net operating losses do not expire.

In addition, we had $15 of foreign tax credit carryovers which will expire in the tax year 2028.

Furthermore, Gyros U.S. had gross net operating loses of $ 11,936 and $ 11,449 , for federal and state tax purposes, respectively, of which the federal net operating losses do not expire, and the state net operating losses begin to expire in the 2022 tax year. In addition, we had $ 16  of foreign tax credit carryovers which will expire in the tax year 2029.

 Gyros U.S. also had $ 153 of Research and Development credit carryforward which will begin to expire in the 2030 tax year.

Commitments and Contingencies

We are party to various legal proceedings arising in the ordinary course of business.

As of March 31, 2020, we are not party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

In February 2018, Dr.

Orrington II filed a putative 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 included counts alleging violations of the Telephone Consumer Protection Act (“TCPA”), the Illinois Consumer Fraud Act, Conversion, Nuisance, and Trespass to Chattels.

The plaintiff sought monetary damages, injunctive relief, and attorneys’ fees.

In January 2019, we received preliminary court approval of a class action settlement with Dr.

Orrington II and the class in the amount of $3,300, and we received final approval on May 28, 2019.

We recorded the final settlement amount on our Consolidated Statements of Operations during the year ended March 31, 2019 and a corresponding liability was included as legal liability on our Consolidated Balance Sheets.

The settlement was paid in full during the year ended March 31, 2020.

Segment information is prepared on the same basis that our CEO, who is our Chief Operating Decision Maker, manages the segments, evaluates financial results, and makes key operating decisions.

We have four reportable segments:

Sterilization and Disinfection Control, Instruments, Biopharmaceutical Development, and Continuous Monitoring (formerly Cold Chain Monitoring).

When determining the reportable segments, we aggregated operating segments based on their similar economic and operating characteristics.

During the year ended March 31, 2020, we exited the Cold Chain Packaging business, which resulted in Management ceasing to consider its results in its analysis of financial results and operational decision making.

As of March 31, 2020, we no longer consider it a reportable segment.

Results for the Cold Chain Packaging division are now presented within Corporate and Other and prior period amounts related to Cold Chain Packaging have been categorized and presented as Corporate and Other.

The following tables set forth our segment information:

As of March 31, 2021, we are not party to any legal proceeding that management believes could have a material adverse effect on our consolidated financial position, results of operations, or cash flows. 

Companies are required to collect and remit sales tax from certain customers if the company is determined to have nexus in a particular state.

The determination of nexus varies by state and often requires technical knowledge of each jurisdiction's tax case law.

During the year ended March 31, 2021, 

we determined that certain subsidiaries of GPT had established nexus in various jurisdictions during prior periods without properly collecting and remitting sales tax, and in certain cases had collected sales tax and not  remitted it.

We estimate the total net exposure including interest and penalties is $ 2,714 , which is included in other accrued expenses on the Consolidated Balance Sheets.

Approximately $ 1,899  of the liability is considered a preacquisition contingency and is included in purchase accounting, which is described in further detail in Note 4 .

 "Significant Transactions." The remainder of the liability represents $ 565  of sales tax payable for sales made in states where we have established nexus and $ 250  of interest incurred on the liabilities subsequent to the date of acquisition.

The amount ultimately remitted may differ from our estimates, which could materially impact the financial statements. We reevaluate the estimated liability each reporting period.

We expect to resolve the liability during the fiscal year ending 

March 31, 2022.

Segment information is prepared on the same basis that our CEO, who is our Chief Operating Decision Maker, uses to manage the segments, evaluate financial results, and make key operating decisions.

We have four reportable segments based primarily upon product type:

Sterilization and Disinfection Control, Instruments, Biopharmaceutical Development, and Continuous Monitoring. When determining the reportable segments, we aggregated operating segments based on their similar economic and operating characteristics.

We evaluate the performance of our operating segments based on revenues, organic revenues growth, and gross margin.

The accounting policies of the operating segments are the same as those described in Note 1.

"Description of Business and Summary of Significant Accounting Policies." The following tables set forth our segment information:

Year Ended March 31,

Total revenues (a)

Sterilization and Disinfection Control

$ 53,119  

$ 49,660  

$ 46,297  

32,465  

37,984  

36,125  

Biopharmaceutical Development

33,892  

13,851  

Continuous Monitoring

Corporate and Other

14,461  

13,729  

13,806  

Reportable segment revenues

133,937  

115,224  

96,228  

Corporate and Other (b)

Total revenues (a)

$ 133,937  

$ 117,687  

$ 103,135  

Gross profit (loss)

Reconciling items (2)

Earnings before income taxes

Year Ended March 31, 2019

Sterilization and Disinfection Control

Biopharmaceutical Development

Continuous Monitoring

Corporate and Other

Reconciling items (2)

Earnings before income taxes

Year Ended March 31, 2018

Sterilization and Disinfection Control

$ 39,870  

$ 35,797  

$ 31,861  

20,158  

24,247  

22,866  

Biopharmaceutical Development

21,035  

Continuous Monitoring

Corporate and Other

Reportable segment gross profit

87,017  

64,944  

60,309  

Corporate and Other (b)

$ 87,014  

$ 65,362  

$ 60,916  

Reconciling Items:

Operating expenses

74,656  

57,439  

51,135  

Operating income

12,358  

Nonoperating expense, net

10,055  

Earnings before income taxes

$ 2,303  

$ 3,862  

$ 8,623  

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

Reconciling items include selling, general and administrative, research and development, impairment of goodwill and long-lived assets, legal settlement, and nonoperating expenses.

We evaluate the performance of our operating segments based on revenues, organic revenues growth, and gross margin.

The accounting policies of the operating segments are the same as those described in Note 1.

"Description of Business and Summary of Significant Accounting Policies." The identifiable assets by segment disclosed in this note are those assets specifically identifiable within each segment and include inventories, accounts receivable, property, plant and equipment, net, right-of-use leased assets directly attributable to operating segments, goodwill, and intangible assets.

Assets not attributed to reportable operating segments are corporate assets and are primarily comprised of cash and cash equivalents, assets related to our selling, general, and administrative functions, right-of-use assets related to selling, general and administrative functions, and prepaid income taxes.

The following table sets forth capital expenditures by reportable segment:

Non-reportable operating segments (including our Cold Chain Packaging Division which ceased operations during the year ended March 31, 2020) 

and unallocated corporate expenses are reported within Corporate and Other. 

Year Ended March 31,

Depreciation and amortization

Sterilization and Disinfection Control

1 unchanged sentence

Continuous Monitoring

Corporate and Other

Year ended March 31, 2020

Year ended March 31, 2019

Year ended March 31, 2018

The following table sets forth depreciation and amortization by reportable segment:

Reportable segment depreciation and amortization

Corporate and Other (c)

14,956  

10,909  

Depreciation and amortization

$ 17,660  

$ 12,990  

$ 9,428  

Capital expenditures

Sterilization and Disinfection Control

1 unchanged sentence

Continuous Monitoring

Reportable segment capital expenditures

Corporate and Other

Year ended March 31, 2020

Year ended March 31, 2019

Year ended March 31, 2018

The following table sets forth total assets by reportable segment:

Capital expenditures

$ 1,992  

$ 1,498  

$ 1,262  

Amortization of intellectual property is included in the calculation of gross margin by segment.

Amortization pertaining to other types of intangible assets, such as customer relationships and trademarks, is included in general and administrative on the Consolidated Statements of Income.

Within the table above, the depreciation and amortization costs that are included in calculating the gross margin of the noted segment are included;

other costs such as amortization that is recorded to general and administrative expense is shown in corporate and other. 

The following table sets forth net inventories by reportable segment.

Our chief operating decision maker is not provided with any other segment asset information. 

March 31, 2021

1 unchanged sentence

Sterilization and Disinfection Control

$ 2,333  

$ 2,104  

Biopharmaceutical Development

Continuous Monitoring

Corporate and Other

The following table sets forth a summary of long-lived assets by geographic area.

Long-lived assets exclude goodwill and intangible assets acquired in a business combination.

Reportable segment Inventory  

11,178  

14,230  

Corporate and administrative

Total inventories

$ 11,178  

$ 14,230  

The following table sets forth a summary of long-lived assets by geographic area. Long-lived assets exclude goodwill and intangible assets acquired in a business combination. 

As of March 31,

United States

Total long-lived assets

$ 21,443  

$ 23,306  

$ 24,528  

$ 24,546  

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

1 unchanged sentence

United States

$ 71,387  

$ 66,344  

$ 64,828  

62,550  

51,343  

38,307  

Total revenues

Revenues are shown based on the geographic location of our customers.

$ 133,937  

$ 117,687  

$ 103,135  

No customer accounts for 10% or more of our revenues.

No foreign country exceeds 10% of total revenues.

No foreign country exceeds 10%  of total revenues.

Quarterly Results (unaudited)

Quarterly financial information for the years ended March 31, 2020 and 2019 is summarized as follows (earnings per share per quarter will not add up to reported annual earnings per share due to differences in average outstanding shares as reported on a quarterly basis) (in thousands, except per share data):

Quarterly financial information for the years ended 

March 31, 2021 and 

2020 is summarized as follows.

Earnings per share per quarter will not sum to reported annual earnings per share due to differences in average outstanding shares as reported on a quarterly basis (in thousands, except per share data):

First Quarter

2 unchanged sentences

Fourth Quarter

$ 29,941  

$ 31,860  

$ 34,172  

$ 37,964  

20,340  

21,285  

20,653  

24,736  

Net income (loss)

( 4,542 )  

Basic earnings (loss) per share

$ 0.27  

$ 0.52  

$ ( 0.89 )  

$ 0.76  

Diluted earnings (loss) per share

( 0.89 )  

First Quarter

2 unchanged sentences

Fourth Quarter

$ 26,288  

$ 25,536  

$ 31,655  

$ 34,208  

16,204  

15,586  

14,803  

18,769  

( 4,504 )  

Basic earnings per share

$ 1.20  

$ 0.76  

$ ( 1.03 )  

Diluted earnings per share

( 1.03 )  

Subsequent Events

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data