10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

oTRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITES EXCHANGE ACT OF 1934

For the transition period from        to

Commission File No: 0-11740

MESA LABORATORIES, INC.

(Exact name of registrant as specified in its charter)

Colorado	84-0872291
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification number)

12100 West Sixth Avenue
Lakewood, Colorado	80228
(Address of principal executive offices)	(Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

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

There were 3,346,145 shares of the Issuer’s common stock, no par value, outstanding as of July 31, 2012.

Table of Contents

PART I.  FINANCIAL INFORMATION
1.	Financial Statements	1
	Condensed Balance Sheets	1
	Condensed Statements of Income	2
	Condensed Statements of Cash Flows	3
	Notes to Condensed Financial Statements	4
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
3.	Quantitative and Qualitative Disclosures About Market Risk	16
4.	Controls and Procedures	16
PART II.  OTHER INFORMATION
1A.	Risk Factors	16
2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
6.	Exhibits	17
	Signatures
	Exhibit Index
	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)
	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
	Certification of Chief Executive Officer Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350
	Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350

Part I. Financial Information

Item 1. Financial Statements

Mesa Laboratories, Inc.

Condensed Balance Sheets

(Dollars in thousands)

	June 30, 2012 (Unaudited)			March 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	4,593		$	7,191
Accounts receivable, net	7,147			6,486
Inventories, net	5,575			4,438
Prepaid expenses and other	969			1,046
Total current assets	18,284			19,161
Property, plant and equipment, net	7,311			7,266
Intangibles and other, net	17,466			9,819
Goodwill	23,650			14,450
Total assets	$	66,711		$	50,696
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	985		$	573
Accrued salaries and payroll taxes	1,498			2,134
Other accrued expenses	572			504
Taxes payable	1,899			1,051
Total current liabilities	4,954			4,262
Deferred income taxes payable	2,519			2,519
Contingent consideration	2,240			—
Long-term debt	11,000			—
Total liabilities	20,713			6,781
Stockholders’ equity:
Preferred stock, no par value	—			—
Common stock, no par value; authorized 8,000,000 shares; issued and outstanding, 3,343,159 shares (June 30, 2012) and 3,321,965 shares (March 31, 2012)	7,129			6,699
Employee loans to purchase stock	(262		)	(396		)
Retained earnings	39,131			37,612
Total stockholders’ equity	45,998			43,915
Total liabilities and stockholders’ equity	$	66,711		$	50,696

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Mesa Laboratories, Inc.

Condensed Statements of Income

(Unaudited)

(Dollars in thousands except earnings per share)

	Three months ended June 30,
	2012		2011
Revenues	$	10,559	$	9,297
Cost of revenues	4,104		3,909
Gross profit	6,455		5,388
Operating expenses
Selling	1,002		939
General and administrative	1,854		1,348
Research and development	380		408
Total operating expenses	3,236		2,695
Operating income	3,219		2,693
Other expense	34		50
Earnings before income taxes	3,185		2,643
Income taxes	1,086		964
Net income	$	2,099	$	1,679
Net income per share:
Basic	$	0.63	$	0.51
Diluted	0.59		0.49
Average common shares outstanding:
Basic	3,337		3,274
Diluted	3,541		3,414

2

Mesa Laboratories, Inc.

Condensed Statements of Cash Flows

(Unaudited))

(Dollars in thousands)

	Three months ended June 30,
	2012			2011
Cash flows from operating activities:
Net income	$	2,099		$	1,679
Depreciation and amortization	784			541
Stock based compensation	149			96
Gain on loan settlement	—			(13		)
Change in assets and liabilities, net of acquisitions
Accounts receivable, net	(120		)	498
Inventories	(227		)	337
Prepaid expenses and other	105			101
Accounts payable	412			55
Accrued liabilities	210			(406		)
Net cash flows from operating activities	3,412			2,888
Cash flows from investing activities:
Business acquisitions and intangibles	(16,660		)	—
Capital expenditures	(185		)	(187		)
Net cash used in investing activities	(16,845		)	(187		)
Cash flows from financing activities:
Proceeds from debt	11,000			—
Payments on debt	—			(250		)
Dividends paid	(434		)	(394		)
Treasury stock purchases	(43		)	(27		)
Proceeds from stock options exercised	312			478
Net cash (used in) provided by financing activities	10,835			(193		)
Net increase (decrease) in cash and cash equivalents	(2,598		)	2,508
Cash and cash equivalents at beginning of period	7,191			3,546
Cash and cash equivalents at end of period	$	4,593		$	6,054
Cash paid for:
Income taxes	$	408		$	50
Interest	—			54

Supplemental disclosure of non-cash activity (dollars in thousands):

We issued employee loans totaling $155 and $220 for the exercise of stock options during the three month periods ended June 30, 2012 and 2011, respectively. Loans of $289 and $304, respectively, were retired in the three month period ended June 30, 2012 and 2011.

We recorded $2,240 of Contingent consideration as part of the Bios Acquisition.

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Mesa Laboratories, Inc. Notes to Condensed Financial Statements

1.  Summary of Accounting Policies

The summary of the Issuer’s significant accounting policies are incorporated by reference to our annual report on Form 10-K, at March 31, 2012.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q, and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position, results of operations and cash flows.  The results of the interim period are not necessarily indicative of the results for the full year.

Reclassification — Approximately $409,000 of customer payments for shipping was reclassified from cost of revenue to revenue in the condensed statement of income for the three month period ended June 30, 2011.  This reclassification affects revenues and cost of revenues, but has no impact on other figures in the condensed statements of income.

2.  Acquisition

On May 15, 2012, we completed a business combination (“Bios Acquisition”) by acquiring specific assets and assuming certain liabilities of Bios International Corporation (“Bios”), a New Jersey corporation.  The Asset Acquisition Agreement (the “Bios Agreement”) includes a provision for contingent consideration based on revenue growth over a three year earn-out period.  The Bios Acquisition further diversifies and grows our Instruments segment, while maintaining our historic profitability measures.

The contingent consideration arrangement requires us to pay Bios if cumulative revenues from the acquisition for the three years subsequent to the acquisition exceed approximately $22,127,000.  The potential undiscounted future payments that we could be required to make is between $0 and $6,710,000.  The preliminary fair value of the contingent consideration arrangement included in the purchase price below was estimated based on Bios’ historic revenue growth.

We expect to achieve significant savings and income growth as we integrate the Bios operations and marketing functions.  These factors, among others, contributed to a purchase price in excess of the estimated fair value of Bios’ net identifiable assets and, as a result, we have recorded goodwill in connection with this transaction.  The goodwill is expected to be deductible for tax purposes.  All of the goodwill is assigned to our Instruments segment.

The Bios Acquisition was accounted for under the purchase method of accounting.  Our acquisition constitutes the acquisition of a business and was recognized at fair value.  Due to the recency of the transaction, the purchase price allocation was based on preliminary estimated fair value of the assets and liabilities acquired, including the preliminary contingent purchase price liability.  We determined the preliminary estimated fair values using discounted cash flow analyses and estimates made by management.  Upon completing our valuation analysis, the preliminary contingent purchase price liability, and the allocation between intangibles and goodwill may change.  The following reflects our preliminary allocation of the consideration, subject to customary purchase price adjustments in accordance with the Bios Agreement (dollars in thousands):

Cash consideration	$	16,660
Preliminary contingent purchase price liability	2,240
Aggregate consideration	$	18,900
The purchase price was allocated as follows:
Accounts receivable, net	$	541
Inventory	910
Other current assets	28
Property, plant and equipment	63
Intangibles	8,228
Goodwill	9,200
Current liabilities	(70		)
Total purchase price allocation	$	18,900

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Our condensed statement of income includes the results of the Bios Acquisition from the acquisition date of May 15, 2012.  The pro forma effects of the acquisition on the results of operations as if the acquisition had been completed April 1, 2012 and 2011, are as follows:

	Three months ended June 30,
(Dollars in thousands, except earnings per share)	2012 (Unaudited)		2011 (Unaudited)
Total net revenue	$	11,340	$	11,080
Net income	2,120		1,726
Net income per common share:
Basic	$	0.64	$	0.53
Diluted	0.60		0.51

The above pro forma results include adjustments for amortization of acquired intangibles, interest expense, and income tax expense.  The pro forma information as presented above is for informational purposes only and is not indicative of results of operations that would have been achieved if the acquisition had taken place at the dates identified.

3.  Inventories

(Dollars in thousands)	June 30, 2012 (Unaudited)			March 31, 2012
Raw materials	$	3,935		$	3,241
Work-in-process	376			331
Finished goods	1,546			1,091
Less: reserve	(282		)	(225		)
	$	5,575		$	4,438

4.  Intangibles

On September 30, 2011, we entered into a license agreement with Photonic Biosystems, Inc. for certain biological indicator technology.  Under the terms of this agreement, we paid $175,000 for rights to the technology, and up to $225,000 of additional payments may be made in the future, depending on meeting certain development and performance milestones.  The $175,000, included in intangible assets on the condensed balance sheets, is being amortized over ten years.  In addition, sales of products covered by this license agreement will be subject to royalty payments.

5.  Debt

(Dollars in thousands)	June 30, 2012 (Unaudited)		March 31, 2012
Credit Facility (1.5% at June 30, 2012)	$	11,000	$	—
Less: current portion	—		—
Long-term portion	$	11,000	$	—

In February 2012, we entered into a three year agreement for a $20,000,000 revolving line of credit and up to $1,000,000 of letters of credit (the “Credit Facility”), maturing in February 2015.  Funds from the Credit Facility may be used for general working capital and corporate needs, retiring existing debt, or to support acquisitions and capital expenditures.

Under the Credit Facility, indebtedness bears interest at either: (1) LIBOR plus an applicable margin, ranging from 1.25% to 2.00%,; or (2) the bank’s commercial bank floating rate (“CBFR”), which is the greater of the bank’s prime rate or one month LIBOR + 2.50%, adjusted down, from 1.25% to 0.50%.  Management elects the interest rate with each borrowing under the line of credit.  There is also an unused capacity fee of 0.15% to 0.30%.  The adjustments and unused capacity fee depend on the ratio

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of funded debt to the Company’s trailing four quarters of EBITDA, as defined, with four tiers ranging from a ratio of less than one to greater than two.  Letter of credit fees are based on the applicable LIBOR rate.

The Credit Facility is secured by all assets of the Company.  The Credit Facility requires us to maintain a ratio of funded debt to the Company’s trailing four quarters of EBIDTA, as defined, of 2.5 to 1.0, and a minimum fixed charge coverage ratio of 1.5 to 1.0.

Future maturities of debt are as follows (dollars in thousands):

Fiscal year
2013	$	—
2014	—
2015	11,000
	$	11,000

In April 2010, we entered into a credit facility consisting of: a) 36 month reducing line of credit for $3,000,000 and maturing at April 27, 2013, requiring quarterly principal payments of $250,000 beginning July 27, 2010, which was retired in February 2012; and b) revolving line of credit for $4,000,000 maturing on December 23, 2011, which was retired in December 2011. Both of these lines of credit were subject to a variable rate of interest and a rate floor.

6.  Stock-based Compensation

Stock-based compensation costs for award grants to employees and directors are valued at fair value and recognized on a straight line basis over the service periods of each award.  We estimate forfeiture rates for the year based on historical experience.  Amounts recognized in the condensed financial statements related to stock-based compensation are as follows:

	Three months ended June 30,
(Dollars in thousands except earnings per share)	2012		2011
Total cost of stock-based compensation charged against income before income taxes	$	149	$	96
Amount of income tax benefit recognized in earnings	51		35
Amount charged against net income	$	98	$	61
Impact on net income per common share:
Basic	$	0.03	$	0.02
Diluted	0.03		0.02

Stock-based compensation expense is included in cost of revenues, and general and administrative expense in the condensed statements of income.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes). We use historical data to estimate the expected price volatility, the expected option life and expected forfeiture rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The dividend yield is calculated based upon the dividend payments made during the prior four quarters as a percent of the average stock price for that period. The following summarizes the Black-Scholes assumptions:

	Three months ended June 30,
	2012	2011
Volatility	31.1%	33.4%
Risk-free interest rate	0.6 — 1.0%	2.2 — 3.6%
Expected option life (years)	5 — 10	5 — 10
Dividend yield	1.5%	1.7%

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The following summarizes option activity:

	Number of Shares		Weighted- average Exercise Price per Share		Weighted- average Remaining Contractual Term	Aggregate Intrinsic Value (000s)
Outstanding at March 31, 2012	433,785		$	22.77	3.9
Options granted	103,880		50.20		6.2
Options forfeited	(7,900	)	30.36
Options expired	—
Options exercised	(29,780	)	20.97
Outstanding at June 30, 2012	499,985		28.46		4.3	$	9,016
Exercisable at June 30, 2012	210,305		20.86		3.3	1,805

We issue new shares of common stock upon exercise of stock options.  The total intrinsic value of options exercised was $851,000 and $495,000 during the three month periods ended June 30, 2012 and 2011, respectively.

A summary of the status of our unvested option shares as of June 30, 2012 is as follows:

	Number of Shares		Weighted- average Grant-Date Fair Value
Unvested at March 31, 2012	284,875		$	7.23
Options granted	103,880		12.37
Options forfeited	(7,900	)	7.86
Options vested	(91,175	)	6.80
Unvested at June 30, 2012	289,680		9.19

As of June 30, 2012, there was approximately $1,918,000 of total unrecognized compensation cost related to unvested stock options granted under our plans, which is expected to be recognized over a weighted-average period of 3 years.

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7.  Net Income Per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share uses the treasury stock method to compute the weighted average common stock outstanding assuming the conversion of potentially dilutive common shares.

The following table presents a reconciliation of the denominators used in the computation of net income per common share - basic and diluted:

	Three Months Ended June 30,
(Amounts in thousands except earnings per share)	2012		2011
Net income available for shareholders	$	2,099	$	1,679
Weighted average outstanding shares of common stock	3,337		3,274
Dilutive effect of stock options	204		140
Common stock and equivalents	3,541		3,414
Earnings per share:
Basic	$	0.63	$	0.51
Diluted	0.59		0.49

For the three months ended June 30, 2012, 101,433 outstanding stock options were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares and, therefore, their inclusion would have been anti-dilutive.  No stock options were excluded for the period ended June 30, 2011.

8.  Contingencies

As part of our Bios Acquisition, the Bios Agreement includes a provision for contingent consideration based on revenue growth over a three year earn-out period.  The contingent consideration arrangement requires us to pay the former owners of Bios if cumulative revenues from the acquisition for the three years subsequent to the acquisition exceed approximately $22,127,000.  The potential undiscounted future payments that we could be required to make is between $0 and $6,710,000.  The preliminary fair value of the contingent consideration arrangement included in the purchase price was estimated based on Bios’ historic revenue growth.  We have recorded a contingent consideration liability of $2,240,000 on the condensed balance sheet as of June 30, 2012.  This amount may change as we finalize our purchase price allocation, with the difference affecting the allocation to the acquired assets and assumed liabilities.  Any changes to the contingent consideration subsequent to our finalizing purchase accounting, however, would impact the income statement.  An increase would be recorded as expense, while a decrease would be recorded as income.  The contingent consideration is payable in the first quarter of fiscal 2016.

During the third quarter of fiscal 2012, we determined that the Company had a potential liability for state sales taxes.  During the first quarter of fiscal 2013, we completed our analysis and determined that no additional liability is required.

9.  Subsequent Events

In August 2012, our Board of Directors declared a quarterly cash dividend of $0.13 per share of common stock, payable on September 17, 2012, to shareholders of record at the close of business on August 29, 2012.

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10.  Segment Data

Our operations are organized into two reporting segments:  Biological Indicators and Instruments.  The following tables set forth our segment information:

(Dollars in thousands)	Biological Indicators			Instruments			Total
Three months ended June 30, 2012
Revenue	$	5,118		$	5,441		$	10,559
Operating Income	1,449			1,770			3,219
Other (Income) and Expense	(2		)	36			34
Capital Expenditures	33			152			185
Bios Acquisition.	—			18,900			18,900
Depreciation	128			75			203
Amortization	403			178			581
Three months ended June 30, 2011
Revenue	$	4,668		$	4,629		$	9,297
Operating Income	941			1,752			2,693
Other (Income) and Expense	53			(3		)	50
Capital Expenditures	125			62			187
Depreciation	113			52			165
Amortization	336			40			376
Total assets
June 30, 2012	$	31,077		$	35,634		$	66,711
March 31, 2012	32,915			17,781			50,696

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

	Three months ended June 30,
(Dollars in thousands)	2012		2011
Net revenues from unaffiliated customers:
United States	$	6,369	$	5,746
Foreign (no country exceeds 10% of total)	4,190		3,551
	$	10,559	$	9,297

All long-lived assets are located in the United States.

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

Overview

Mesa Laboratories, Inc. has two segments — Our Instruments Division manufactures and markets quality control instruments and disposable products utilized in connection with the healthcare, pharmaceutical, food and beverage, medical device, and petrochemical industries.  Our Biological Indicators Division manufactures and markets biological indicators and distributes chemical indicators used to assess the effectiveness of sterilization processes in the hospital, dental, medical device and pharmaceutical industries.  We follow a philosophy of manufacturing a high quality product and providing a high level of on-going service for those products.

Our revenues come from two main sources — products sales, and parts and services.  Product sales are dependent on several factors, including general economic conditions, both domestic and international, customer capital spending trends, competition, introduction of new products, and acquisitions.  Biological indicator products are disposable and are used on a routine basis for quality control, thus product sales are less sensitive to general economic conditions.  Instrument products have a longer life, and their purchase by our customers is somewhat discretionary, so sales are more sensitive to general economic conditions.  Parts and service demand is driven by our customers’ quality control and regulatory environments, which require periodic repair and recalibration or certification of our instrument products.  We typically evaluate costs and pricing annually.  Our policy is to price our products competitively and, where possible, we try to pass along cost increases in order to maintain our margins.  As part of the integration of our biological indicator acquisitions we have been adjusting prices to achieve price parity for similar products.

Gross profit is affected by our product mix, manufacturing efficiencies and price competition.  As we have integrated our acquisitions and taken advantage of manufacturing efficiencies, the Biological Indicator segment gross margins have improved and are now more comparable to the Instruments segment.  The mix between segments, however, may continue to impact our overall gross margin.

Selling expense is driven primarily by labor costs, including salaries and commissions.  Accordingly, they may vary with sales levels.  Labor costs and amortization of intangible assets drive 70-80% of general and administrative expense.  Research and development expense is predominantly comprised of labor costs.

Discussion of Key Indicators and Trends

In May 2012, we completed a business combination (the “Bios Acquisition”) by acquiring specific assets and assuming certain liabilities of Bios International Corporation (“Bios”), a New Jersey corporation.  Consideration consisted of a $15,660,000 closing payment and a future payment of $1,000,000 held in escrow.  Contingent consideration involves a three year earn-out period.  If cumulative revenues from the acquisition for the three year period subsequent to acquisition exceed certain growth targets, additional consideration of up to $6,710,000 will be required.  We borrowed $11,000,000 under our Credit Facility to finance the acquisition, with the balance being paid from available cash.  Due to the recency of the transaction, the purchase price allocation was based on preliminary estimated fair value of the assets and liabilities acquired, including the preliminary contingent purchase price liability.  Upon completing our valuation analysis, the preliminary contingent purchase price liability, and the allocation between intangibles and goodwill may change.

Acquisitions in May 2012, December 2010, April 2010 and December 2009, impacted our current assets and working capital, as we used available cash and incurred debt to complete those transactions.  It typically takes us from six to twelve months to fully integrate acquisitions, which impacts the key indicators during that time frame.

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(Dollars in thousands except earnings per	Key Financial Indicators As of and for the three months ended June 30,
share)	2012			2011			2010			2009			2008
Cash and cash equivalents	$	4,593		$	6,054		$	2,541		$	10,759		$	6,390
Trade Receivables Gross	$	7,519		$	6,851		$	5,350		$	3,748		$	3,768
Days Revenues Outstanding (1)	57			67			58			66			63
Inventory, Net	$	5,575		$	5,377		$	5,936		$	4,749		$	4,498
Inventory Turns	3.0			2.6			2.1			1.7			1.7
Working Capital	$	13,330		$	9,254		$	8,769		$	18,005		$	13,571
Current Ratio	4:1			2:1			3:1			13:1			11:1
Average Return On:
Stockholder Investments (2)	19		%	18		%	17		%	15		%	17		%
Assets	13		%	13		%	14		%	14		%	16		%
Invested Capital (3)	17		%	18		%	19		%	22		%	22		%
Revenues (4)	$	10,559		$	9,297		$	7,781		$	5,245		$	5,329
Gross Profit (4)	$	6,455		$	5,388		$	4,381		$	2,983		$	3,204
Gross Margin (4)	61		%	58		%	56		%	57		%	60		%
Operating Income	$	3,219		$	2,693		$	2,214		$	1,608		$	1,536
Operating Margin (4)	30		%	29		%	28		%	31		%	29		%
Net Income	$	2,099		$	1,679		$	1,320		$	1,026		$	1,016
Net Profit Margin (4)	20		%	18		%	17		%	20		%	19		%
Earnings Per Diluted Share	$	0.59		$	0.49		$	0.40		$	0.31		$	.31
Earnings Before Income Tax, Depreciation, Amortization and Impairment of intangible asset	$	3,969		$	3,184		$	2,619		$	1,800		$	1,756
Capital Expenditures, Net	$	185		$	187		$	2,346		$	29		$	63
Employees (average for the period)	200			178			170			114			118
Revenues Per Employee (annualized)	$	211		$	209		$	183		$	184		$	181

(1) Days revenues outstanding is based on specific Revenues in that period, not average Revenues.

(2) Average return on stockholder investment is calculated by dividing total annualized net income by the average of end and beginning of period total stockholder’s equity.

(3) Average return on invested capital (invested capital = total assets - current liabilities - cash and cash equivalents) is calculated by dividing total annualized net income by the average of end and beginning of period invested capital.

(4)  Customer payments for shipping have been reclassified from cost of revenue to revenue for all five periods presented.  This reclassification affects revenue, gross margin, gross margin percentage, operating margin percentage and net profit margin percentage, but has no impact on other figures in the income statement.

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Reconciliation of Non-GAAP Measure

Earnings before income tax, depreciation and amortization is used by management as a supplemental performance and liquidity measure, primarily to assess financial performance without regard to historical cost basis, the ability of our assets to generate cash, and the evaluation of potential acquisitions.

Earnings before income tax, depreciation and amortization should not be considered an alternative to, or more meaningful than, net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance or liquidity.

The following table sets forth our reconciliation of Earnings before income tax, depreciation and amortization, a non-GAAP measure:

	Three months ended June 30,
(Dollars in thousands)	2012		2011		2010		2009		2008
Net income	$	2,099	$	1,679	$	1,320	$	1,026	$	1,016
Income taxes	1,086		964		882		588		549
Depreciation	203		165		167		82		65
Amortization	581		376		250		104		126
	$	3,969	$	3,184	$	2,619	$	1,800	$	1,756

12

Results of Operations

	Three months ended June 30,									Percent
(Dollars in thousands)	2012			2011			Change			Change
Revenues	$	10,559		$	9,297		$	1,262		14	%
Cost of revenues	4,104			3,909			195			5	%
Gross profit	6,455			5,388			1,067			20	%
Gross margin	61		%	58		%	3		%
Operating expenses	3,236			2,695			541			20	%
Net income	2,099			1,679			420			25	%
Net profit margin	20		%	18		%	2		%

Revenues

The following table summarizes our revenues by source:

	Three months ended June 30,						Percent
(Dollars in thousands)	2012		2011		Change		Change
Biological Indicators — Product	$	5,118	$	4,668	$	450	10	%
Instruments:
Product	3,607		2,998		609		20	%
Parts and disposables	756		698		58		8	%
Service	1,078		933		145		16	%
Total Instruments	5,441		4,629		812		18	%
	$	10,559	$	9,297	1,262		14	%

Biological indicator product sales increased due to continued organic growth, achieved through existing customers and expanding into new markets.  Instruments revenues increased primarily due to the Bios Acquisition in May 2012, while our other Instruments revenues were relatively flat.

Cost of Revenues / Gross Profit

Biological indicator gross profit increased approximately $586,000 for the three month period ended June 30, 2012, compared to the prior year, due to improved manufacturing efficiencies and higher sales.

Gross profit for Instruments increased approximately $481,000 for the three month period ended June 30, 2012, compared to the prior year, primarily due to the Bios Acquisition.  Gross profit for other Instruments product lines was relatively unchanged.

Operating Expenses

Selling expenses increased approximately $63,000 for the three month period ended June 30, 2012, compared to the prior year.  The Bios Acquisition increased our costs, but we were able to offset these with cost savings elsewhere.  As a percent of sales, selling expense remained relatively flat.

General and administrative expense increased approximately $506,000 for the three month period ended June 30, 2012, compared to the prior year.  The increase relates primarily to a) additional amortization of approximately $200,000 from the Bios Acquisition and the amortization of trademarks, which we began in the fourth quarter of fiscal 2012; b) increased labor costs for additional personnel and salary adjustments; and c) professional fees of approximately $80,000 associated with the Bios Acquisition.

13

Research and development expense decreased approximately $28,000 for the three month period ended June 30, 2012, compared to the prior year.  Our internal costs increased, but our external consulting expense decreased.  The cost of intangible assets that are purchased from others for use in research and development activities and have future use are capitalized and amortized over their expected useful lives. In fiscal 2012, we partially funded Biological Indicator research, which was capitalized as an intangible asset because it has alternative future uses.  That project continues in fiscal 2013.

Net Income

Net income varied consistently with the growth in revenues and gross profit, as we managed our other expenses.  Our effective income tax rate decreased period over period because the goodwill from the Bios acquisition is deductible for tax purposes.

Liquidity and Capital Resources

Our sources of liquidity may include cash generated from operations, working capital, capacity under our Credit Facility, and potential equity and debt offerings.  We believe that cash generated from these sources will be sufficient to meet our short-term and long-term needs.  Our more significant uses of resources include quarterly dividends to shareholders, payment of debt obligations, long-term capital equipment expenditures and potential acquisitions.

We invest surplus cash in various interest bearing instruments, including money market funds.  All investments are fixed dollar investments with variable rates in order to minimize the risk of principal loss.

Working capital is the amount by which current assets exceed current liabilities.  We had working capital of approximately $13,330,000 and $14,899,000, respectively, at June 30 and March 31, 2012.  The decrease in working capital is due to the use of cash for the Bios Acquisition, offset by higher sales and net income.

In February 2012, we entered into a three year agreement for a $20,000,000 revolving line of credit and up to $1,000,000 of letters of credit (the “Credit Facility”).  Funds from the Credit Facility may be used for general working capital and corporate needs, retiring existing debt, or to support acquisitions and capital expenditures.  In February 2012 we also extinguished our obligations under our previous debt agreement.  In May 2012, we borrowed $11,000,000 against the Credit Facility to partially finance the Bios Acquisition.  At June 30, 2012, we had unused capacity under our Credit Facility of $9,000,000.

We routinely evaluate opportunities for strategic acquisitions.  Future material acquisitions may require that we obtain additional capital, assume third party debt or incur other long-term obligations.  We have the option to utilize both equity and debt instruments as vehicles for the long-term financing of our investment activities and acquisitions.

On November 7, 2005, our Board of Directors has authorized a program to repurchase up to 300,000 shares of our outstanding common stock.  Under the plan, the shares may be purchased from time to time in the open market at prevailing prices or in negotiated transactions off the market.  Shares purchased will be canceled and repurchases will be made with existing cash reserves. We do not maintain a set policy or schedule for our buyback program.

14

On November 12, 2003, our Board of Directors instituted a policy of paying regular quarterly dividends.  Dividends per share paid by quarter were as follows:

	Fiscal Year
	2013		2012
First quarter	$	0.13	$	0.12
Second quarter	—		0.12
Third quarter	—		0.13
Fourth quarter	—		0.13

On August 8, 2012, our Board of Directors declared a quarterly cash dividend of $0.13 per share of common stock, payable on September 17, 2012, to shareholders of record at the close of business on August 29, 2012.

Cash Flow — Operating, investing and financing activities were as follows:

	Three months ended June 30,
(Dollars in thousands)	2012			2011
Net cash provided by operating activities	$	3,412		$	2,888
Net cash used in investing activities	(16,845		)	(187		)
Net cash provided by (used in) financing activities	10,835			(193		)

Net cash provided by operating activities changed primarily due to increased sales and improved net income, as well as management of working capital.

Net cash used in investing activities was driven by a $16,660,000 acquisition in May 2012.  Capital expenditures were $185,000 and $187,000, respectively, during the quarters ended June 30, 2012 and 2011.

Financing activity in the quarter ended June 30, 2012, included borrowing under our Credit Facility of $11,000,000 and the payment of dividends of $434,000, offset by proceeds from exercised stock options of $312,000.  Activity in the quarter ended June 30, 2011, included repayment of debt of $250,000, payment of dividends of $394,000, offset by proceeds from exercised stock options of $478,000.

At June 30, 2012, we had contractual obligations for open purchase orders for routine purchases of supplies and inventory, which would be payable in less than one year.  In September 2011, we entered into a license agreement for certain biological indicator technology and up to $225,000 of additional payments may be made in the future, depending on meeting certain development and performance milestones.  As part of our Bios Acquisition, the Bios Agreement includes a provision for contingent consideration based on revenue growth over a three year earn-out period.  The contingent consideration arrangement requires us to pay the former owners of Bios if cumulative revenues from the acquisition for the three years subsequent to the acquisition exceed approximately $22,127,000.  The potential undiscounted future payments that we could be required to make is between $0 and $6,710,000.

Forward Looking Statements

All statements other than statements of historical fact included in this quarterly report regarding our Company’s financial position and operating and strategic initiatives and addressing industry developments are forward-looking statements.  Where, in any forward-looking statement, the Company, or its management, expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.  Factors which could cause actual results to differ materially from those anticipated, include but are not limited to general economic, financial and business conditions; competition in the data logging market; competition in the kidney dialysis market; competition in the fluid measurement market; competition in the biological indicator market; competition in the bottlecap torque testing market; the business abilities and judgment of personnel; the impacts of unusual items resulting from ongoing evaluations of business strategies; and changes in business strategy.  We do not intend to update these forward looking statements except to the extent required by federal securities laws.  You are advised to review Item 1A. “Risk Factors” provided in our most recent Form 10-K filing with the SEC for more information about risks that could affect the financial results of Mesa Laboratories, Inc.

15

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market risks, currently all investments are in dollar denominated accounts, such as money market funds, with variable interest rates. In the normal course of business, we employ established policies and procedures to manage our exposure to changes in the market value of our investments.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as required by Sarbanes-Oxley (SOX) Section 404(a).  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.  Management evaluated the effectiveness of our internal control over financial reporting based on the framework in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our internal control over financial reporting as of June 30, 2012. Based on that evaluation, our management concluded that our internal control over financial reporting was effective at June 30, 2012.  As allowed, this evaluation excludes the operations of Bios due to the recency of the acquisition. Revenues related to the Bios Acquisition were approximately 7% of total revenues for the quarter ended June 30, 2012.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1A. Risk factors

We are affected by risks specific to us as well as factors that affect all businesses operating in a global market.  The significant factors known to us that could materially adversely affect our business, financial condition or operating results are described in our annual report on Form 10-K for the fiscal year ended March 31, 2012, under the heading “Part I — Item 1A. Risk Factors.”  There has been no material change in those risk factors.

16

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

We made the following repurchases of our common stock, including settlement of loans to employees for the exercise of stock options, within the first quarter of the fiscal year covered by this report.

	Shares Purchased	Avg. Price Paid		Total Shares Purchased as Part of Publicly Announced Plan	Remaining Shares to Purchase Under Plan
April 2012	3,281	$	50.32	151,633	148,367
May 2012	442	47.93		152,075	147,925
June 2012	3,092	45.85		155,167	144,833
Total	6,815	48.14

On November 7, 2005, the Board of Directors of Mesa Laboratories, Inc. adopted a share repurchase plan which allows for the repurchase of up 300,000 of the Company’s common shares.  This plan will continue until the maximum is reached or the plan is terminated by further action of the Board.

Item 6. Exhibits

a)  Exhibits:

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from the quarterly report on Form 10-Q of Mesa Laboratories, Inc. for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Statements of Income, (ii) Condensed Balance Sheets, (iii) Condensed Statements of Cash Flows, and (iv) Notes to the Condensed Financial Statements.

b)  Reports on Form 8-K:

On July 27, 2012, the Registrant filed a Report on Form 8-K/A, under Item 9.01, providing financial statements of businesses acquired and pro forma financial information, related to the asset acquisition from Bios International Corporation.

On July 10, 2012, the Registrant filed a Report on Form 8-K, under Item 5.02, reporting the departure of the Company’s Executive Vice President of Operations — Biological Indicators, for personal reasons.

On May 23, 2012, the Registrant filed a Report on Form 8-K, under Item 2.02, reporting the issuance of a press release reporting revenues and earnings for the year ended March 31, 2012.

On May 21, 2012, the Registrant filed a Report on Form 8-K, under Items 1.01 and 2.01, reporting the asset acquisition from Bios International Corporation.

17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MESA LABORATORIES, INC.
(Registrant)
DATED:	August 10, 2012	BY:	/s/ John J. Sullivan, Ph.D.
			John J. Sullivan, Ph.D.
			Chief Executive Officer,
			President, Treasurer, and Director
DATED:	August 10, 2012	BY:	/s/ Steven W. Peterson
			Steven W. Peterson
			Vice President-Finance,
			Chief Financial and Accounting Officer and Secretary

18

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS PURSUANT TO RULE 13a-14(a)

I, John J. Sullivan, Ph.D., certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	August 10, 2012	/s/ John J. Sullivan, Ph.D
		John J. Sullivan, Ph.D.
		Chief Executive Officer

1

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS PURSUANT TO RULE 13a-14(a)

I, Steven W. Peterson, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	August 10, 2012	/s/ Steven W. Peterson
		Steven W. Peterson
		Chief Financial Officer

1

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO RULE 13a-14(b) AND 18 U.S.C SECTION 1350

In connection with the Quarterly Report of Mesa Laboratories, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John J. Sullivan, Ph.D., Chief Executive Officer of the Company, certify, pursuant to Rule 13a-14(b) and 18 U.S.C. § 1350, that:

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

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

Date:	August 10, 2012	/s/ John J. Sullivan, Ph.D.
		John J. Sullivan, Ph.D.
		Chief Executive Officer

1

EX-32.2

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO RULE 13a-14(b) AND 18 U.S.C SECTION 1350

In connection with the Quarterly Report of Mesa Laboratories, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven W. Peterson, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) and 18 U.S.C. § 1350, that:

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

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

Date:	August 10, 2012	/s/Steven W. Peterson
		Steven W. Peterson
		Chief Financial Officer

1

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012
Inventories
Raw materials	$ 3,935	$ 3,241
Work-in-process	376	331
Finished goods	1,546	1,091
Less: reserve	(282)	(225)
Total	$ 5,575	$ 4,438

XML

Intangibles

3 Months Ended

Jun. 30, 2012

Intangibles

Intangibles

4.  Intangibles

On September 30, 2011, we entered into a license agreement with Photonic Biosystems, Inc. for certain biological indicator technology.  Under the terms of this agreement, we paid $175,000 for rights to the technology, and up to $225,000 of additional payments may be made in the future, depending on meeting certain development and performance milestones.  The $175,000, included in intangible assets on the condensed balance sheets, is being amortized over ten years.  In addition, sales of products covered by this license agreement will be subject to royalty payments.

XML

Net Income Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Net Income Per Common Share
Net income available for shareholders	$ 2,099	$ 1,679
Weighted average outstanding shares of common stock	3,337,000	3,274,000
Dilutive effect of stock options (in shares)	204,000	140,000
Common stock and equivalents (in shares)	3,541,000	3,414,000
Earnings per share:
Basic (in dollars per share)	$ 0.63	$ 0.51
Diluted (in dollars per share)	$ 0.59	$ 0.49
Anti-dilutive stock options excluded from the calculation of diluted earnings per share (in shares)	101,433

XML

Stock-based Compensation (Details) (USD $)	3 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2012
Amounts recognized in the condensed financial statements related to stock-based compensation
Total cost of stock-based compensation charged against income before income taxes	$ 149,000	$ 96,000
Amount of income tax benefit recognized in earnings	51,000	35,000
Amount charged against net income	98,000	61,000
Impact on net income per common share:
Basic (in dollars per share)	$ 0.03	$ 0.02
Diluted (in dollars per share)	$ 0.03	$ 0.02
Stock options
Assumptions used to estimate the fair value of options granted
Volatility (as a percent)	31.10%	33.40%
Risk-free interest rate, minimum (as a percent)	0.60%	2.20%
Risk-free interest rate, maximum (as a percent)	1.00%	3.60%
Dividend yield (as a percent)	1.50%	1.70%
Number of Shares
Outstanding at the beginning of the period (in shares)	433,785
Options granted (in shares)	103,880
Options forfeited (in shares)	(7,900)
Options exercised (in shares)	(29,780)
Outstanding at the end of the period (in shares)	499,985		433,785
Exercisable at the end of the period (in shares)	210,305
Weighted-average Exercise Price per Share
Outstanding at the beginning of the period (in dollars per share)	$ 22.77
Options granted (in dollars per share)	$ 50.20
Options forfeited (in dollars per share)	$ 30.36
Options exercised (in dollars per share)	$ 20.79
Outstanding at the end of the period (in dollars per share)	$ 28.46		$ 22.77
Exercisable at the end of the period (in dollars per share)	$ 20.86
Weighted- average Remaining Contractual Term
Outstanding	4 years 3 months 18 days		3 years 10 months 24 days
Options granted	6 years 2 months 12 days
Exercisable at the end of the period	3 years 3 months 18 days
Aggregate Intrinsic Value
Outstanding at the end of the period	9,016,000
Exercisable at the end of the period	1,805,000
Weighted average grant date fair value of option granted and intrinsic value of option exercised
Intrinsic value of options exercised	851,000	495,000
Number of Shares
Unvested at the beginning of the period (in shares)	284,875
Options granted (in shares)	103,880
Options forfeited (in shares)	(7,900)
Options vested (in shares)	(91,175)
Unvested at the end of the period (in shares)	289,680		284,875
Weighted-average Grant-Date Fair Value
Unvested at the beginning of the period (in dollars per share)	$ 7.23
Options granted (in dollars per share)	$ 12.37
Options forfeited (in dollars per share)	$ 7.86
Options vested (in dollars per share)	$ 6.80
Unvested at the end of the period (in dollars per share)	$ 9.19		$ 7.23
Unrecognized compensation cost
Unrecognized compensation cost	$ 1,918,000
Weighted average period of recognition	3 years
Stock options | Minimum
Assumptions used to estimate the fair value of options granted
Expected option life (years)	5 years	5 years
Stock options | Maximum
Assumptions used to estimate the fair value of options granted
Expected option life (years)	10 years	10 years

XML

Contingencies (Details) (Bios, USD $)	1 Months Ended
	May 31, 2012	Jun. 30, 2012	May 15, 2012
Bios
Contingencies
Earn-out period for determination of contingent consideration	3 years
Minimum revenue required in three years subsequent to the acquisition for payment of contingent consideration			$ 22,127,000
Potential undiscounted future payments, low end of range			0
Potential undiscounted future payments, high end of range			6,710,000
Contingent consideration liability		$ 2,240,000

XML

Subsequent Events (Details) (USD $)	1 Months Ended
	Aug. 31, 2012
Subsequent events
Quarterly cash dividend (in dollars per share)	$ 0.13

XML

Inventories

3 Months Ended

Jun. 30, 2012

Inventories

Inventories

3.  Inventories

(Dollars in thousands)	June 30, 2012 (Unaudited)			March 31, 2012
Raw materials	$	3,935		$	3,241
Work-in-process	376			331
Finished goods	1,546			1,091
Less: reserve	(282		)	(225		)
	$	5,575		$	4,438

XML

Segment Data (Details) (USD $)	3 Months Ended
	Jun. 30, 2012 segment	Jun. 30, 2011	Mar. 31, 2012
Segment Data
Number of reportable segments	2
Segment data
Revenue	$ 10,559,000	$ 9,297,000
Operating Income	3,219,000	2,693,000
Other (Income) and Expense	34,000	50,000
Capital Expenditures	185,000	187,000
Bios acquisition	18,900,000
Depreciation	203,000	165,000
Amortization	581,000	376,000
Total assets	66,711,000		50,696,000
Net revenues from unaffiliated customers:
Net revenues from unaffiliated customers	10,559,000	9,297,000
Percentage of revenue, minimum	10.00%	10.00%
Biological Indicators
Segment data
Revenue	5,118,000	4,668,000
Operating Income	1,449,000	941,000
Other (Income) and Expense	(2,000)	53,000
Capital Expenditures	33,000	125,000
Depreciation	128,000	113,000
Amortization	403,000	336,000
Total assets	31,077,000		32,915,000
Net revenues from unaffiliated customers:
Net revenues from unaffiliated customers	5,118,000	4,668,000
Instruments
Segment data
Revenue	5,441,000	4,629,000
Operating Income	1,770,000	1,752,000
Other (Income) and Expense	36,000	(3,000)
Capital Expenditures	152,000	62,000
Bios acquisition	18,900,000
Depreciation	75,000	52,000
Amortization	178,000	40,000
Total assets	35,634,000		17,781,000
Net revenues from unaffiliated customers:
Net revenues from unaffiliated customers	5,441,000	4,629,000
United States
Segment data
Revenue	6,369,000	5,746,000
Net revenues from unaffiliated customers:
Net revenues from unaffiliated customers	6,369,000	5,746,000
Foreign
Segment data
Revenue	4,190,000	3,551,000
Net revenues from unaffiliated customers:
Net revenues from unaffiliated customers	$ 4,190,000	$ 3,551,000

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Condensed Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012
Current assets:
Cash and cash equivalents	$ 4,593	$ 7,191
Accounts receivable, net	7,147	6,486
Inventories, net	5,575	4,438
Prepaid expenses and other	969	1,046
Total current assets	18,284	19,161
Property, plant and equipment, net	7,311	7,266
Intangibles and other, net	17,466	9,819
Goodwill	23,650	14,450
Total assets	66,711	50,696
Current liabilities:
Accounts payable	985	573
Accrued salaries and payroll taxes	1,498	2,134
Other accrued expenses	572	504
Taxes payable	1,899	1,051
Total current liabilities	4,954	4,262
Deferred income taxes payable	2,519	2,519
Contingent consideration	2,240
Long-term debt	11,000
Total liabilities	20,713	6,781
Stockholders' equity:
Preferred stock, no par value
Common stock, no par value; authorized 8,000,000 shares; issued and outstanding, 3,343,159 shares (June 30, 2012) and 3,321,965 shares (March 31, 2012)	7,129	6,699
Employee loans to purchase stock	(262)	(396)
Retained earnings	39,131	37,612
Total stockholders' equity	45,998	43,915
Total liabilities and stockholders' equity	$ 66,711	$ 50,696

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Summary of Accounting Policies

3 Months Ended

Jun. 30, 2012

Summary of Accounting Policies

Summary of Accounting Policies

1.  Summary of Accounting Policies

The summary of the Issuer’s significant accounting policies are incorporated by reference to our annual report on Form 10-K, at March 31, 2012.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q, and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position, results of operations and cash flows.  The results of the interim period are not necessarily indicative of the results for the full year.

Reclassification — Approximately $409,000 of customer payments for shipping was reclassified from cost of revenue to revenue in the condensed statement of income for the three month period ended June 30, 2011.  This reclassification affects revenues and cost of revenues, but has no impact on other figures in the condensed statements of income.

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Segment Data (Tables)

3 Months Ended

Jun. 30, 2012

Segment Data

Schedule of business segment information

(Dollars in thousands)	Biological Indicators			Instruments			Total
Three months ended June 30, 2012
Revenue	$	5,118		$	5,441		$	10,559
Operating Income	1,449			1,770			3,219
Other (Income) and Expense	(2		)	36			34
Capital Expenditures	33			152			185
Bios Acquisition.	—			18,900			18,900
Depreciation	128			75			203
Amortization	403			178			581
Three months ended June 30, 2011
Revenue	$	4,668		$	4,629		$	9,297
Operating Income	941			1,752			2,693
Other (Income) and Expense	53			(3		)	50
Capital Expenditures	125			62			187
Depreciation	113			52			165
Amortization	336			40			376
Total assets
June 30, 2012	$	31,077		$	35,634		$	66,711
March 31, 2012	32,915			17,781			50,696

Schedule of revenues from external customers are attributed to individual countries based upon locations

	Three months ended June 30,
(Dollars in thousands)	2012		2011
Net revenues from unaffiliated customers:
United States	$	6,369	$	5,746
Foreign (no country exceeds 10% of total)	4,190		3,551
	$	10,559	$	9,297

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Acquisition (Details) (USD $)	1 Months Ended	3 Months Ended
	May 31, 2012	Jun. 30, 2012	Jun. 30, 2011	May 15, 2012
Acquisition
Aggregate consideration		$ 18,900,000
Bios
Acquisition
Earn-out period for determination of contingent consideration	3 years
Minimum revenue required in three years subsequent to the acquisition for payment of contingent consideration				22,127,000
Potential undiscounted future payments, low end of range				0
Potential undiscounted future payments, high end of range				6,710,000
Cash consideration				16,660,000
Preliminary contingent purchase price liability				2,240,000
Aggregate consideration				18,900,000
The purchase price was allocated as follows:
Accounts receivable, net				541,000
Inventory				910,000
Other current assets				28,000
Property, plant and equipment				63,000
Intangibles				8,228,000
Goodwill				9,200,000
Current liabilities				(70,000)
Total purchase price allocation				18,900,000
Pro forma effects of the acquisition on the results of operations
Total net revenue		11,340,000	11,080,000
Net income		$ 2,120,000	$ 1,726,000
Net income per common share:
Basic (in dollars per share)		$ 0.64	$ 0.53
Diluted (in dollars per share)		$ 0.60	$ 0.51

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Acquisition

3 Months Ended

Jun. 30, 2012

Acquisition

Acquisition

2.  Acquisition

On May 15, 2012, we completed a business combination (“Bios Acquisition”) by acquiring specific assets and assuming certain liabilities of Bios International Corporation (“Bios”), a New Jersey corporation.  The Asset Acquisition Agreement (the “Bios Agreement”) includes a provision for contingent consideration based on revenue growth over a three year earn-out period.  The Bios Acquisition further diversifies and grows our Instruments segment, while maintaining our historic profitability measures.

The contingent consideration arrangement requires us to pay Bios if cumulative revenues from the acquisition for the three years subsequent to the acquisition exceed approximately $22,127,000.  The potential undiscounted future payments that we could be required to make is between $0 and $6,710,000.  The preliminary fair value of the contingent consideration arrangement included in the purchase price below was estimated based on Bios’ historic revenue growth.

We expect to achieve significant savings and income growth as we integrate the Bios operations and marketing functions.  These factors, among others, contributed to a purchase price in excess of the estimated fair value of Bios’ net identifiable assets and, as a result, we have recorded goodwill in connection with this transaction.  The goodwill is expected to be deductible for tax purposes.  All of the goodwill is assigned to our Instruments segment.

The Bios Acquisition was accounted for under the purchase method of accounting.  Our acquisition constitutes the acquisition of a business and was recognized at fair value.  Due to the recency of the transaction, the purchase price allocation was based on preliminary estimated fair value of the assets and liabilities acquired, including the preliminary contingent purchase price liability.  We determined the preliminary estimated fair values using discounted cash flow analyses and estimates made by management.  Upon completing our valuation analysis, the preliminary contingent purchase price liability, and the allocation between intangibles and goodwill may change.  The following reflects our preliminary allocation of the consideration, subject to customary purchase price adjustments in accordance with the Bios Agreement (dollars in thousands):

Cash consideration	$	16,660
Preliminary contingent purchase price liability	2,240
Aggregate consideration	$	18,900
The purchase price was allocated as follows:
Accounts receivable, net	$	541
Inventory	910
Other current assets	28
Property, plant and equipment	63
Intangibles	8,228
Goodwill	9,200
Current liabilities	(70		)
Total purchase price allocation	$	18,900

Our condensed statement of income includes the results of the Bios Acquisition from the acquisition date of May 15, 2012.  The pro forma effects of the acquisition on the results of operations as if the acquisition had been completed April 1, 2012 and 2011, are as follows:

	Three months ended June 30,
(Dollars in thousands, except earnings per share)	2012 (Unaudited)		2011 (Unaudited)
Total net revenue	$	11,340	$	11,080
Net income	2,120		1,726
Net income per common share:
Basic	$	0.64	$	0.53
Diluted	0.60		0.51

The above pro forma results include adjustments for amortization of acquired intangibles, interest expense, and income tax expense.  The pro forma information as presented above is for informational purposes only and is not indicative of results of operations that would have been achieved if the acquisition had taken place at the dates identified.

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Condensed Balance Sheets (Parenthetical)	Jun. 30, 2012	Mar. 31, 2012
Condensed Balance Sheets
Common stock, authorized shares	8,000,000	8,000,000
Common stock, issued shares	3,343,159	3,321,965
Common stock, outstanding shares	3,343,159	3,321,965

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Acquisition (Tables)

3 Months Ended

Jun. 30, 2012

Acquisition

Schedule of preliminary allocation of the consideration, subject to customary purchase price adjustments in accordance with the Bios Agreement

Cash consideration	$	16,660
Preliminary contingent purchase price liability	2,240
Aggregate consideration	$	18,900
The purchase price was allocated as follows:
Accounts receivable, net	$	541
Inventory	910
Other current assets	28
Property, plant and equipment	63
Intangibles	8,228
Goodwill	9,200
Current liabilities	(70		)
Total purchase price allocation	$	18,900

Schedule of pro forma effects of the acquisition on the results of operations

	Three months ended June 30,
(Dollars in thousands, except earnings per share)	2012 (Unaudited)		2011 (Unaudited)
Total net revenue	$	11,340	$	11,080
Net income	2,120		1,726
Net income per common share:
Basic	$	0.64	$	0.53
Diluted	0.60		0.51

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Document and Entity Information	3 Months Ended
	Jun. 30, 2012	Jul. 31, 2012
Document and Entity Information
Entity Registrant Name	MESA LABORATORIES INC /CO
Entity Central Index Key	0000724004
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Current Reporting Status	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		3,346,145
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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Inventories (Tables)

3 Months Ended

Jun. 30, 2012

Inventories

Schedule of inventories

(Dollars in thousands)	June 30, 2012 (Unaudited)			March 31, 2012
Raw materials	$	3,935		$	3,241
Work-in-process	376			331
Finished goods	1,546			1,091
Less: reserve	(282		)	(225		)
	$	5,575		$	4,438

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Condensed Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Revenues	$ 10,559	$ 9,297
Cost of revenues	4,104	3,909
Gross profit	6,455	5,388
Operating expenses
Selling	1,002	939
General and administrative	1,854	1,348
Research and development	380	408
Total operating expenses	3,236	2,695
Operating income	3,219	2,693
Other expense	34	50
Earnings before income taxes	3,185	2,643
Income taxes	1,086	964
Net income	$ 2,099	$ 1,679
Net income per share:
Basic (in dollars per share)	$ 0.63	$ 0.51
Diluted (in dollars per share)	$ 0.59	$ 0.49
Average common shares outstanding:
Basic (in shares)	3,337	3,274
Diluted (in shares)	3,541	3,414

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Net Income Per Common Share

3 Months Ended

Jun. 30, 2012

Net Income Per Common Share

Net Income Per Common Share

7.  Net Income Per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share uses the treasury stock method to compute the weighted average common stock outstanding assuming the conversion of potentially dilutive common shares.

The following table presents a reconciliation of the denominators used in the computation of net income per common share - basic and diluted:

	Three Months Ended June 30,
(Amounts in thousands except earnings per share)	2012		2011
Net income available for shareholders	$	2,099	$	1,679
Weighted average outstanding shares of common stock	3,337		3,274
Dilutive effect of stock options	204		140
Common stock and equivalents	3,541		3,414
Earnings per share:
Basic	$	0.63	$	0.51
Diluted	0.59		0.49

For the three months ended June 30, 2012, 101,433 outstanding stock options were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares and, therefore, their inclusion would have been anti-dilutive.  No stock options were excluded for the period ended June 30, 2011.

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Stock-based Compensation

3 Months Ended

Jun. 30, 2012

Stock-based Compensation

Stock-based Compensation

6.  Stock-based Compensation

Stock-based compensation costs for award grants to employees and directors are valued at fair value and recognized on a straight line basis over the service periods of each award.  We estimate forfeiture rates for the year based on historical experience.  Amounts recognized in the condensed financial statements related to stock-based compensation are as follows:

	Three months ended June 30,
(Dollars in thousands except earnings per share)	2012		2011
Total cost of stock-based compensation charged against income before income taxes	$	149	$	96
Amount of income tax benefit recognized in earnings	51		35
Amount charged against net income	$	98	$	61
Impact on net income per common share:
Basic	$	0.03	$	0.02
Diluted	0.03		0.02

Stock-based compensation expense is included in cost of revenues, and general and administrative expense in the condensed statements of income.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes). We use historical data to estimate the expected price volatility, the expected option life and expected forfeiture rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The dividend yield is calculated based upon the dividend payments made during the prior four quarters as a percent of the average stock price for that period. The following summarizes the Black-Scholes assumptions:

	Three months ended June 30,
	2012	2011
Volatility	31.1%	33.4%
Risk-free interest rate	0.6 — 1.0%	2.2 — 3.6%
Expected option life (years)	5 — 10	5 — 10
Dividend yield	1.5%	1.7%

The following summarizes option activity:

	Number of Shares		Weighted- average Exercise Price per Share		Weighted- average Remaining Contractual Term	Aggregate Intrinsic Value (000s)
Outstanding at March 31, 2012	433,785		$	22.77	3.9
Options granted	103,880		50.20		6.2
Options forfeited	(7,900	)	30.36
Options expired	—
Options exercised	(29,780	)	20.97
Outstanding at June 30, 2012	499,985		28.46		4.3	$	9,016
Exercisable at June 30, 2012	210,305		20.86		3.3	1,805

We issue new shares of common stock upon exercise of stock options.  The total intrinsic value of options exercised was $851,000 and $495,000 during the three month periods ended June 30, 2012 and 2011, respectively.

A summary of the status of our unvested option shares as of June 30, 2012 is as follows:

	Number of Shares		Weighted- average Grant-Date Fair Value
Unvested at March 31, 2012	284,875		$	7.23
Options granted	103,880		12.37
Options forfeited	(7,900	)	7.86
Options vested	(91,175	)	6.80
Unvested at June 30, 2012	289,680		9.19

As of June 30, 2012, there was approximately $1,918,000 of total unrecognized compensation cost related to unvested stock options granted under our plans, which is expected to be recognized over a weighted-average period of 3 years.

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Summary of Accounting Policies (Details) (USD $)	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cost of revenues	$ 4,104,000	$ 3,909,000
Revenue	10,559,000	9,297,000
Reclassification
Cost of revenues		(409,000)
Revenue		$ 409,000

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Debt (Tables)

3 Months Ended

Jun. 30, 2012

Debt

Schedule of debt

(Dollars in thousands)	June 30, 2012 (Unaudited)		March 31, 2012
Credit Facility (1.5% at June 30, 2012)	$	11,000	$	—
Less: current portion	—		—
Long-term portion	$	11,000	$	—

Schedule of future maturities of debt

Fiscal year
2013	$	—
2014	—
2015	11,000
	$	11,000

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Segment Data

3 Months Ended

Jun. 30, 2012

Segment Data

Segment Data

10.  Segment Data

Our operations are organized into two reporting segments:  Biological Indicators and Instruments.  The following tables set forth our segment information:

(Dollars in thousands)	Biological Indicators			Instruments			Total
Three months ended June 30, 2012
Revenue	$	5,118		$	5,441		$	10,559
Operating Income	1,449			1,770			3,219
Other (Income) and Expense	(2		)	36			34
Capital Expenditures	33			152			185
Bios Acquisition.	—			18,900			18,900
Depreciation	128			75			203
Amortization	403			178			581
Three months ended June 30, 2011
Revenue	$	4,668		$	4,629		$	9,297
Operating Income	941			1,752			2,693
Other (Income) and Expense	53			(3		)	50
Capital Expenditures	125			62			187
Depreciation	113			52			165
Amortization	336			40			376
Total assets
June 30, 2012	$	31,077		$	35,634		$	66,711
March 31, 2012	32,915			17,781			50,696

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

	Three months ended June 30,
(Dollars in thousands)	2012		2011
Net revenues from unaffiliated customers:
United States	$	6,369	$	5,746
Foreign (no country exceeds 10% of total)	4,190		3,551
	$	10,559	$	9,297

All long-lived assets are located in the United States.

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Contingencies

3 Months Ended

Jun. 30, 2012

Contingencies

Contingencies

8.  Contingencies

As part of our Bios Acquisition, the Bios Agreement includes a provision for contingent consideration based on revenue growth over a three year earn-out period.  The contingent consideration arrangement requires us to pay the former owners of Bios if cumulative revenues from the acquisition for the three years subsequent to the acquisition exceed approximately $22,127,000.  The potential undiscounted future payments that we could be required to make is between $0 and $6,710,000.  The preliminary fair value of the contingent consideration arrangement included in the purchase price was estimated based on Bios’ historic revenue growth.  We have recorded a contingent consideration liability of $2,240,000 on the condensed balance sheet as of June 30, 2012.  This amount may change as we finalize our purchase price allocation, with the difference affecting the allocation to the acquired assets and assumed liabilities.  Any changes to the contingent consideration subsequent to our finalizing purchase accounting, however, would impact the income statement.  An increase would be recorded as expense, while a decrease would be recorded as income.  The contingent consideration is payable in the first quarter of fiscal 2016.

During the third quarter of fiscal 2012, we determined that the Company had a potential liability for state sales taxes.  During the first quarter of fiscal 2013, we completed our analysis and determined that no additional liability is required.

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Subsequent Events

3 Months Ended

Jun. 30, 2012

Subsequent Events

Subsequent Events

9.  Subsequent Events

In August 2012, our Board of Directors declared a quarterly cash dividend of $0.13 per share of common stock, payable on September 17, 2012, to shareholders of record at the close of business on August 29, 2012.

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Summary of Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2012

Summary of Accounting Policies

Reclassification

Reclassification — Approximately $409,000 of customer payments for shipping was reclassified from cost of revenue to revenue in the statement of income for the three month period ended June 30, 2011.  This reclassification affects revenues and cost of revenues, but has no impact on other figures in the condensed statements of income.

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Net Income Per Common Share (Tables)

3 Months Ended

Jun. 30, 2012

Net Income Per Common Share

Schedule of reconciliation of the denominators used in the computation of net income per common share -basic and diluted

	Three Months Ended June 30,
(Amounts in thousands except earnings per share)	2012		2011
Net income available for shareholders	$	2,099	$	1,679
Weighted average outstanding shares of common stock	3,337		3,274
Dilutive effect of stock options	204		140
Common stock and equivalents	3,541		3,414
Earnings per share:
Basic	$	0.63	$	0.51
Diluted	0.59		0.49

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Intangibles (Details) (USD $)			1 Months Ended	3 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2011 License agreement for biological indicator technology Photonic Biosystems, Inc	Jun. 30, 2012 License agreement for biological indicator technology Photonic Biosystems, Inc
Acquisition of technology
Payment for acquisition of rights of the technology			$ 175,000
Additional amount to be paid			225,000
Intangible assets	$ 17,466,000	$ 9,819,000		$ 175,000
Amortization period (in years)				10 years

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Condensed Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities:
Net income	$ 2,099	$ 1,679
Depreciation and amortization	784	541
Stock based compensation	149	96
Gain on loan settlement		(13)
Change in assets and liabilities, net of acquisitions
Accounts receivable, net	(120)	498
Inventories	(227)	337
Prepaid expenses and other	105	101
Accounts payable	412	55
Accrued liabilities	210	(406)
Net cash flows from operating activities	3,412	2,888
Cash flows from investing activities:
Business acquisitions and intangibles	(16,660)
Capital expenditures	(185)	(187)
Net cash used in investing activities	(16,845)	(187)
Cash flows from financing activities:
Proceeds from debt	11,000
Payments on debt		(250)
Dividends paid	(434)	(394)
Treasury stock purchases	(43)	(27)
Proceeds from stock options exercised	312	478
Net cash (used in) provided by financing activities	10,835	(193)
Net increase (decrease) in cash and cash equivalents	(2,598)	2,508
Cash and cash equivalents at beginning of period	7,191	3,546
Cash and cash equivalents at end of period	4,593	6,054
Cash paid for:
Income taxes	408	50
Interest		54
Supplemental disclosure of non-cash activity:
The Company issued employee loans for the purchase of common stock during the three month period ended June 30, 2012 and 2011, respectively	155	220
Loans outstanding retired	289	304
Contingent consideration	$ 2,240

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Debt

3 Months Ended

Jun. 30, 2012

Debt

Debt

5.  Debt

(Dollars in thousands)	June 30, 2012 (Unaudited)		March 31, 2012
Credit Facility (1.5% at June 30, 2012)	$	11,000	$	—
Less: current portion	—		—
Long-term portion	$	11,000	$	—

In February 2012, we entered into a three year agreement for a $20,000,000 revolving line of credit and up to $1,000,000 of letters of credit (the “Credit Facility”), maturing in February 2015.  Funds from the Credit Facility may be used for general working capital and corporate needs, retiring existing debt, or to support acquisitions and capital expenditures.

Under the Credit Facility, indebtedness bears interest at either: (1) LIBOR plus an applicable margin, ranging from 1.25% to 2.00%,; or (2) the bank’s commercial bank floating rate (“CBFR”), which is the greater of the bank’s prime rate or one month LIBOR + 2.50%, adjusted down, from 1.25% to 0.50%.  Management elects the interest rate with each borrowing under the line of credit.  There is also an unused capacity fee of 0.15% to 0.30%.  The adjustments and unused capacity fee depend on the ratio of funded debt to the Company’s trailing four quarters of EBITDA, as defined, with four tiers ranging from a ratio of less than one to greater than two.  Letter of credit fees are based on the applicable LIBOR rate.

The Credit Facility is secured by all assets of the Company.  The Credit Facility requires us to maintain a ratio of funded debt to the Company’s trailing four quarters of EBIDTA, as defined, of 2.5 to 1.0, and a minimum fixed charge coverage ratio of 1.5 to 1.0.

Future maturities of debt are as follows (dollars in thousands):

Fiscal year
2013	$	—
2014	—
2015	11,000
	$	11,000

In April 2010, we entered into a credit facility consisting of: a) 36 month reducing line of credit for $3,000,000 and maturing at April 27, 2013, requiring quarterly principal payments of $250,000 beginning July 27, 2010, which was retired in February 2012; and b) revolving line of credit for $4,000,000 maturing on December 23, 2011, which was retired in December 2011. Both of these lines of credit were subject to a variable rate of interest and a rate floor.

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Debt (Details) (USD $)		3 Months Ended						3 Months Ended					1 Months Ended
	Jun. 30, 2012	Jun. 30, 2012 Credit facility tier quarter	Jun. 30, 2012 Credit facility Minimum	Jun. 30, 2012 Credit facility Maximum	Jun. 30, 2012 Credit facility LIBOR	Jun. 30, 2012 Credit facility LIBOR Minimum	Jun. 30, 2012 Credit facility LIBOR Maximum	Jun. 30, 2012 Credit facility CBFR	Jun. 30, 2012 Credit facility CBFR Minimum	Jun. 30, 2012 Credit facility CBFR Maximum	Jun. 30, 2012 Letters of credit	Jun. 30, 2012 Letters of credit LIBOR	Apr. 30, 2010 Reducing line of credit	Jun. 30, 2012 Revolving line of credit	Apr. 30, 2010 Revolving line of credit
Debt
Credit Facility	$ 11,000,000
Long-term portion	11,000,000
Debt instrument, term		3 years											36 months
Maximum borrowing capacity											1,000,000		3,000,000	20,000,000	4,000,000
Description of variable rate basis					LIBOR			CBFR
Spread on variable rate (as a percent)						1.25%	2.00%		0.50%	1.25%	1.50%
Description of variable rate basis used to calculate CBFR		Prime rate			One month LIBOR
Spread on variable rate used to calculate CBFR (as a percent)												2.50%
Unused capacity fee (as a percent)			0.15%	0.30%
Number of trailing quarters of EBITDA used to calculate ratio of funded debt to EBITDA		4
Number of tiers of ratio of funded debt to EBITDA		4
High end of ratio of funded debt to the entity's trailing four quarters of EBIDTA for unused capacity fees			2
Low end of ratio of funded debt to the entity's trailing four quarters of EBIDTA for unused capacity fees				1
Ratio of funded debt to EBIDTA required to be maintained, numerator		2.5
Ratio of funded debt to EBIDTA required to be maintained, denominator		1.0
Fixed charge coverage ratio, required to be maintained, numerator		1.5
Fixed charge coverage ratio, required to be maintained, denominator		1.0
Fiscal year
2015	11,000,000
Credit Facility	11,000,000
Periodic principal amount
Required quarterly principal payment													$ 250,000

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Stock-based Compensation (Tables)

3 Months Ended

Jun. 30, 2012

Stock-based Compensation

Schedule of amounts recognized in the condensed financial statements related to stock-based compensation

	Three months ended June 30,
(Dollars in thousands except earnings per share)	2012		2011
Total cost of stock-based compensation charged against income before income taxes	$	149	$	96
Amount of income tax benefit recognized in earnings	51		35
Amount charged against net income	$	98	$	61
Impact on net income per common share:
Basic	$	0.03	$	0.02
Diluted	0.03		0.02

Schedule of Black-Scholes assumptions

	Three months ended June 30,
	2012	2011
Volatility	31.1%	33.4%
Risk-free interest rate	0.6 — 1.0%	2.2 — 3.6%
Expected option life (years)	5 — 10	5 — 10
Dividend yield	1.5%	1.7%

Summary of stock option activity

	Number of Shares		Weighted- average Exercise Price per Share		Weighted- average Remaining Contractual Term	Aggregate Intrinsic Value (000s)
Outstanding at March 31, 2012	433,785		$	22.77	3.9
Options granted	103,880		50.20		6.2
Options forfeited	(7,900	)	30.36
Options expired	—
Options exercised	(29,780	)	20.97
Outstanding at June 30, 2012	499,985		28.46		4.3	$	9,016
Exercisable at June 30, 2012	210,305		20.86		3.3	1,805

Summary of the status of unvested option shares

	Number of Shares		Weighted- average Grant-Date Fair Value
Unvested at March 31, 2012	284,875		$	7.23
Options granted	103,880		12.37
Options forfeited	(7,900	)	7.86
Options vested	(91,175	)	6.80
Unvested at June 30, 2012	289,680		9.19