COMPUTATION OF NET INCOME PER COMMON SHARE

9 Months Ended

Sep. 30, 2020

COMPUTATION OF NET INCOME PER COMMON SHARE

COMPUTATION OF NET INCOME PER COMMON SHAREBasic and diluted net income per share are computed by dividing net income by the weighted average number of outstanding common shares during the period. In the basic and diluted earnings per share calculations, net income is equal to net income attributable to The Pennant Group, Inc. adjusted to include net income attributable to noncontrolling interest. Net income attributable to the noncontrolling interest has been included in the numerator for all periods as the non-controlling subsidiary interest included in the Interim Financial Statements was converted into common shares of Pennant concurrent with the distribution to Ensign stockholders at the date of the Spin-Off. The total number of common shares distributed on

October 1, 2019 of 27,834 is being utilized for the calculation of basic and diluted earnings per share for all prior periods, as no common stock was outstanding prior to the date of the Spin-Off.

The following table sets forth the computation of basic and diluted net income per share for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator:
Net income attributable to The Pennant Group, Inc.	$	4,407	$	1,524	$	11,724	$	6,345
Add: net income attributable to noncontrolling interests	—		279		—		629
Net Income	$	4,407	$	1,803	$	11,724	$	6,974

Denominator:
Weighted average shares outstanding for basic net income per share	28,055		27,834		27,967		27,834
Plus: assumed incremental shares from exercise of options and assumed conversion or vesting of restricted stock(a)	2,188		—		1,988		—
Adjusted weighted average common shares outstanding for diluted income per share	30,243		27,834		29,955		27,834

Earnings Per Share:
Basic net income per common share	$	0.16	$	0.06	$	0.42	$	0.25
Diluted net income per common share	$	0.15	$	0.06	$	0.39	$	0.25


(a)						The calculation of dilutive shares outstanding excludes out-of-the-money stock options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Options outstanding which are anti-dilutive and therefore not factored into the weighted average common shares amount above were 224 and 45 for the three and nine months ended September 30, 2020, respectively.