Earnings per Common Share

12 Months Ended

Dec. 31, 2019

9. 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, if any, by the weighted average number of common shares outstanding during the year. Prior to the acquisition of the remaining noncontrolling interest in Laser Quantum in September 2018, 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 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. However, for both basic and diluted

earnings per common share, such redemption value adjustments were included in the calculation of the numerator for 2018 and 2017.

For diluted earnings per common share, the denominator includes the dilutive effects of outstanding restricted stock units, stock options, total shareholder return performance-based restricted stock units and certain 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 assuming the end of the reporting period is also the end of the performance period. The dilutive effects of attainment-based contingently issuable shares granted to the former Laser Quantum noncontrolling interest shareholders and non-GAAP EPS performance-based restricted stock units are included in the weighted average dilutive share calculation after the performance targets have been achieved.

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

	Year Ended December 31,
	2019⁽¹⁾		2018⁽²⁾			2017⁽³⁾
Numerators:
Consolidated net income	$	40,773	$	51,095		$	62,307
Less: Net income attributable to noncontrolling interest		—		(1,986	)		(2,256	)
Net income attributable to Novanta Inc.		40,773		49,109			60,051
Redeemable noncontrolling interest redemption value adjustment		—		1,781			(20,244	)
Net income attributable to Novanta Inc. after adjustment for redeemable noncontrolling interest redemption value	$	40,773	$	50,890		$	39,807

Denominators:
Weighted average common shares outstanding— basic		35,030		34,913			34,817
Dilutive potential common shares		516		560			463
Weighted average common shares outstanding— diluted		35,546		35,473			35,280
Antidilutive potential common shares excluded from above		41		4			—

Earnings per Common Share Attributable to Novanta Inc.:
Basic	$	1.16	$	1.46		$	1.14
Diluted	$	1.15	$	1.43		$	1.13

(1)

For the year ended December 31, 2019, 46 non-GAAP EPS performance-based restricted stock units granted to certain members of the executive management team and 213 shares of restricted stock issued to Laser Quantum former non-controlling interest shareholders are considered contingently issuable shares and were excluded from the calculation of the denominator as the contingent conditions had not been met as of December 31, 2019.

(2)

For the year ended December 31, 2018, 54 non-GAAP EPS performance-based restricted stock units granted to certain members of the executive management team and 213 shares of restricted stock issued to Laser Quantum former non-controlling interest shareholders were considered contingently issuable shares and were excluded from the calculation of the denominator as the contingent conditions had not been met as of December 31, 2018.

(3)	For the year ended December 31, 2017, 59 non-GAAP EPS performance-based restricted stock units granted to certain members of the executive management team were excluded from the calculation of the denominator as the contingent conditions had not been met as of December 31, 2017.