COMPUTATION OF NET INCOME PER COMMON SHARE

12 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

Computation of net income per common share

COMPUTATION OF NET INCOME PER COMMON SHARE

Basic 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.

Prior to Spin-Off

Net income attributable to the noncontrolling interest has been included in the numerator for the years ended December 31, 2019 and 2018, respectively, as the non-controlling subsidiary interest that existed prior to the Spin-Off was converted into common shares of Pennant concurrent with the distribution to Ensign stockholders at 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:

	Year Ended December 31,
	2020		2019		2018
Numerator:
Net income	$	15,553	$	3,175	$	16,279
Add: net (loss)/ income attributable to noncontrolling interests	(191)		629		595
Net income attributable to The Pennant Group, Inc.	$	15,744	$	2,546	$	15,684
Denominator:
Weighted average shares outstanding for basic net income per share(a)	28,029		27,838		27,834
Plus: incremental shares from assumed conversion(b)	2,199		1,748		—
Adjusted weighted average common shares outstanding for diluted income per share	30,228		29,586		27,834
Earnings Per Share:
Basic net income per common share(c)	$	0.56	$	0.11	$	0.58
Diluted net income per common share(c)	$	0.52	$	0.11	$	0.58

(a)	Concurrent with the Spin-Off the noncontrolling subsidiary interest converted into 1,160 shares of Pennant. The total number of common shares distributed on October 1, 2019 of 27,834 was utilized in the denominator for the calculation of basic and diluted earnings per share for the year ended December 31, 2018 , as no common stock was outstanding prior to the date of the Spin-Off.
(b)	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 93 and 15 for the years ended December 31, 2020 and 2019, respectively.
(c)	For the years ended December 31, 2019 and 2018 basic and diluted earnings per share were calculated based on net income as the numerator, which included the conversion of the noncontrolling interest in connection with the Spin-Off. For the year ended December 31, 2020, basic and diluted earnings per share was calculated based on net income attributable to The Pennant Group, Inc. as the numerator, . See Note 7, Acquisitions, for further information on our acquisitions for the year ended December 31, 2020.