Net Income Per Share

6 Months Ended

Jun. 30, 2011

Net Income Per Share

Net Income Per Share

NOTE 13. NET INCOME PER SHARE

The following is a reconciliation of the numerator and denominator of basic and diluted net income per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Numerator:
Net income attributable to Endo Pharmaceuticals Holdings Inc. common stockholders	$	54,583	$	51,460	$	110,370	$	111,815
Denominator:
For basic per share data — weighted average shares		116,663		116,060		116,509		116,704
Dilutive effect of common stock equivalents		2,434		600		2,352		642
Dilutive effect of 1.75% Convertible Senior Subordinated Notes and warrants		3,589		—		2,863		—
For diluted per share data — weighted average shares		122,686		116,660		121,724		117,346
Basic net income per share attributable to Endo Pharmaceuticals Holdings Inc	$	0.47	$	0.44	$	0.95	$	0.96
Diluted net income per share attributable to Endo Pharmaceuticals Holdings Inc	$	0.44	$	0.44	$	0.91	$	0.95

Basic net income per share is computed based on the weighted average number of common shares outstanding during the period. Diluted income per common share is computed based on the weighted average number of common shares outstanding and, if there is net income during the period, the dilutive impact of common stock equivalents outstanding during the period. Common stock equivalents are measured under the treasury stock method.

The 1.75% Convertible Senior Subordinated Notes due April 15, 2015 are only included in the dilutive net income per share calculation using the treasury stock method during periods in which the average market price of our common stock was above the applicable conversion price of the Convertible Notes, or $29.20 per share. In these periods, under the treasury stock method, we calculated the number of shares issuable under the terms of these notes based on the average market price of the stock during the period, and included that number in the total diluted shares outstanding for the period.

We have entered into convertible note hedge and warrant agreements that, in combination, have the economic effect of reducing the dilutive impact of the Convertible Notes. However, we separately analyze the impact of the convertible note hedge and the warrant agreements on diluted weighted average shares outstanding. As a result, the purchases of the convertible note hedges are excluded because their impact would be anti-dilutive. The treasury stock method is applied when the warrants are in-the-money with the proceeds from the exercise of the warrant used to repurchase shares based on the average stock price in the calculation of diluted weighted average shares. Until the warrants are in-the-money, they have no impact to the diluted weighted average share calculation. The total number of shares that could potentially be included if the warrants were exercised is approximately 13 million.

The following reconciliation shows the maximum potential dilution of shares currently excluded from the calculation of diluted net income per share for the six months ended June 30 (in thousands):

	2011		2010
Weighted average shares excluded:
1.75% Convertible senior subordinated notes due 2015 and warrants(1)		23,130		25,993
Employee stock-based awards		1,279		5,150
		24,409		31,143

(1) Amounts represent the incremental potential total dilution that could occur if our Convertible Notes and warrants were converted to shares of our common stock.