Mesa Laboratories(MLAB) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's analysis of financial condition. Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, covering balance sheets, operations, cash flows, and equity, with detailed notes. Condensed Consolidated Balance Sheets This section details the company's financial position, presenting assets, liabilities, and stockholders' equity. Condensed Consolidated Balance Sheets (in thousands) | | December 31, 2018 | March 31, 2018 | | :--- | :--- | :--- | | Total current assets | $32,561 | $31,988 | | Total assets | $158,160 | $164,101 | | Total current liabilities | $20,783 | $17,290 | | Total liabilities | $50,567 | $64,740 | | Total stockholders' equity | $107,593 | $99,361 | - Total assets decreased to $158.2 million as of December 31, 2018, from $164.1 million as of March 31, 2018, primarily due to decreases in goodwill and intangibles[8] - Total liabilities saw a significant reduction to $50.6 million from $64.7 million, largely driven by a decrease in long-term debt from $44.6 million to $27.2 million[8] Condensed Consolidated Statements of Operations This section details the company's financial performance, including revenues, gross profit, operating income, and net income. Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2018 | Three Months Ended Dec 31, 2017 | Nine Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2017 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $26,682 | $23,671 | $76,689 | $69,298 | | Gross Profit | $15,634 | $12,681 | $45,302 | $38,585 | | Operating Income (Loss) | $1,320 | $(10,088) | $7,222 | $(4,458) | | Net Income (Loss) | $858 | $(11,086) | $6,082 | $(7,216) | | Diluted EPS | $0.21 | $(2.93) | $1.51 | $(1.92) | - The company reported a net income of $858 thousand for the three months ended December 31, 2018, a significant turnaround from a net loss of $11.1 million in the prior-year period. The improvement was largely due to a smaller impairment loss on goodwill and long-lived assets ($3.7 million vs. $13.8 million YoY)[10] Condensed Consolidated Statements of Comprehensive (Loss) Income This section presents net income adjusted for other comprehensive income items, such as foreign currency translation adjustments. Comprehensive (Loss) Income (in thousands) | | Three Months Ended Dec 31, 2018 | Three Months Ended Dec 31, 2017 | Nine Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2017 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $858 | $(11,086) | $6,082 | $(7,216) | | Foreign currency translation adjustments | $(658) | $181 | $(2,019) | $1,880 | | Comprehensive (loss) income | $200 | $(10,905) | $4,063 | $(5,336) | Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities. Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2017 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,292 | $16,078 | | Net cash used in investing activities | $(3,825) | $(16,840) | | Net cash (used in) provided by financing activities | $(16,057) | $884 | - Cash from operations increased to $20.3 million for the nine months ended Dec 31, 2018, compared to $16.1 million in the prior year. Cash used in investing activities decreased significantly due to lower acquisition spending ($4.8 million vs. $15.4 million YoY). Cash used in financing activities increased primarily due to higher debt repayments[16] Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's stockholders' equity, including net income, dividends, and other equity adjustments. - Total stockholders' equity increased from $99.4 million at March 31, 2018, to $107.6 million at December 31, 2018. This change was driven by net income of $6.1 million and stock-based compensation, partially offset by dividends paid and negative foreign currency translation adjustments[8][19] - The company paid dividends of $0.16 per share in each of the three quarters during the nine-month period ended December 31, 2018[19] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies, significant transactions, and financial events. - The company operates through four divisions: Sterilization and Disinfection Control, Instruments, Cold Chain Monitoring, and Cold Chain Packaging[27] - A non-cash impairment charge of $3.7 million was recognized on goodwill ($1.0 million) and long-lived assets ($2.6 million) related to the Cold Chain Packaging reporting segment due to its financial results falling short of expectations and rising commodity costs[45] - The company recorded a $3.3 million expense as an estimated loss for a class action lawsuit alleging violations of the Telephone Consumer Protection Act (TCPA). In January 2019, a preliminary court approval for a settlement in this amount was received[65] - The effective income tax rate for the nine months ended December 31, 2018 was 8.6%, differing from the 21% federal statutory rate primarily due to state income taxes, share-based payment awards, and foreign rate differentials[61] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial performance, highlighting revenue growth, segment performance, commodity cost impacts, and liquidity. Results of Operations This section analyzes the company's revenue, gross profit, and operating income, detailing performance across business segments. Organic Revenue Growth by Segment (vs. Prior Year) | Segment | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Sterilization and Disinfection Control | 6% | 1% | | Instruments | 14% | 8% | | Cold Chain Monitoring | 14% | 6% | | Cold Chain Packaging | 29% | 26% | | Total Company | 11% | 6% | - Overall revenues increased 13% for the three months and 11% for the nine months ended December 31, 2018, driven by both organic growth and acquisitions from the prior fiscal year[81][83] - The Cold Chain Packaging segment's gross profit margin decreased significantly to 13% for the quarter (from 28% YoY) and 10% for the nine months (from 19% YoY) due to higher commodity costs and lower-than-standard pricing on a large customer contract[88][92] - Operating income for the quarter was $1.3 million, a substantial improvement from a loss of $10.1 million in the prior-year quarter, primarily due to a lower impairment charge on goodwill and long-lived assets[83] Liquidity and Capital Resources This section examines the company's working capital, debt levels, available credit, and dividend policy. - The company's working capital was $11.8 million at December 31, 2018, down from $14.7 million at March 31, 2018[100] - Total interest-bearing debt was reduced to $29.5 million from $46.6 million at March 31, 2018. As of December 31, 2018, the company had $68.0 million of unused capacity under its line of credit[101][104] - The company has paid regular quarterly dividends since 2003 and declared a dividend of $0.16 per share for the quarter[105] Quantitative and Qualitative Disclosures about Market Risk The company reports minimal market risk exposure, no derivative use, and immaterial foreign currency risk due to U.S. dollar transactions. - The company states it has no derivative instruments and minimal exposure to commodity market risks[108] - Foreign currency risk is not considered material as a substantial majority of operations are transacted in U.S. dollars[108] Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with no material changes. - Based on an evaluation as of December 31, 2018, management, including the CEO and CFO, concluded that the company's internal control over financial reporting was effective[110] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[111] PART II. OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, and filed exhibits. Legal Proceedings This section refers to Note 10 for details on a class action lawsuit related to the TCPA, with a $3.3 million estimated settlement accrued. - Information regarding legal proceedings is detailed in Note 10 of the financial statements, which discusses a class action lawsuit for which a $3.3 million estimated legal settlement has been recorded[113][65] Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2018. - There have been no material changes to the risk factors described in the company's Annual Report on Form 10-K for the year ended March 31, 2018[114] Unregistered Sales of Equity Securities and Use of Proceeds The company reports on its share repurchase plan, authorizing up to 300,000 shares, with 162,486 purchased to date, but no recent repurchases. - The company has a share repurchase plan allowing for up to 300,000 shares, with 162,486 purchased to date. No repurchases have been made in the current or any of the last three fiscal years[115] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL financial statements. - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[117] Signatures The report is formally signed and authorized by the Chief Executive Officer and Chief Financial Officer on February 4, 2019. - The Form 10-Q was signed on February 4, 2019, by Gary M. Owens, Chief Executive Officer, and John V. Sakys, Chief Financial Officer[119]