Earnings per Common Share

9 Months Ended

Sep. 27, 2019

5. Earnings per Common Share

Basic earnings per common share is computed by dividing net income attributable to Novanta Inc., after redeemable noncontrolling interest redemption value adjustment, by the weighted average number of common shares outstanding during the period. The Company recognized changes in the redeemable noncontrolling interest redemption value by adjusting the carrying amount of the redeemable noncontrolling interest as of the end of the applicable period to the higher of: (i) the estimated redemption value assuming the end of the period was also the redemption date or (ii) the carrying value without any redemption value adjustments. Such adjustments were recorded in retained earnings in stockholders’ equity instead of net income attributable to Novanta Inc. For both basic and diluted earnings per common share, such redemption value adjustments were included in the calculation of the numerator.

For diluted earnings per common share, the denominator also includes the dilutive effect of outstanding common share equivalents. For the three and nine months ended September 27, 2019 and September 28, 2018, respectively, weighted average shares outstanding for the diluted earnings per common share included the dilutive effect of outstanding restricted stock units, stock options, total shareholder return performance-based restricted stock units and the 2017 non-GAAP EPS performance-based restricted stock units, determined using the treasury stock method. The dilutive effects of market-based contingently issuable shares are included in the weighted average dilutive share calculation based on the number of shares, if any, that would be issuable as of the end of the reporting period. Dilutive effects of attainment-based contingently issuable shares granted to the former Laser Quantum noncontrolling interest shareholders, as well as the 2018 and 2019 non-GAAP EPS performance-based restricted stock units will be included in the weighted average dilutive share calculation when the performance targets have been achieved.

The following table sets forth the computation of basic and diluted earnings per common share (amounts in thousands, except per share data):

	Three Months Ended					Nine Months Ended
	September 27,		September 28,			September 27,		September 28,
	2019⁽¹⁾		2018⁽²⁾			2019⁽¹⁾		2018⁽²⁾
Numerators:
Consolidated net income	$	8,923	$	14,989		$	31,556	$	39,451
Less: Net income attributable to noncontrolling interest		—		(435	)		—		(1,986	)
Net income attributable to Novanta Inc.		8,923		14,554			31,556		37,465
Redeemable noncontrolling interest redemption value adjustment		—		6,877			—		1,781
Net income attributable to Novanta Inc. after adjustment for redeemable noncontrolling interest redemption value	$	8,923	$	21,431		$	31,556	$	39,246

Denominators:
Weighted average common shares outstanding— basic		35,074		34,899			35,012		34,918
Dilutive potential common shares		511		586			511		551
Weighted average common shares outstanding— diluted		35,585		35,485			35,523		35,469
Antidilutive potential common shares excluded from above		35		—			43		—

Earnings per Common Share Attributable to Novanta Inc.:
Basic	$	0.25	$	0.61		$	0.90	$	1.12
Diluted	$	0.25	$	0.60		$	0.89	$	1.11

(1)

47,147 performance-based restricted stock units granted to certain members of the executive management team and 213,219 shares of restricted stock issued to Laser Quantum former non-controlling interest holders are considered contingently issuable shares and were excluded from the calculation of the denominator as the contingent conditions had not been met as of September 27, 2019.

(2)

53,968 performance-based restricted stock units granted to certain members of the executive management team and 213,219 shares of restricted stock issued to Laser Quantum former non-controlling interest holders were considered contingently issuable shares and were excluded from the calculation of the denominator as the contingent conditions had not been met as of September 28, 2018.