Shareholders' Equity

3 Months Ended

Mar. 31, 2014

Stockholders' Equity Note [Abstract]

Shareholders' equity

NOTE 14. SHAREHOLDERS’ EQUITY

In prior periods, our consolidated financial statements presented the accounts of EHSI. On October 31, 2013, Endo International plc was incorporated in Ireland as a private limited company and re-registered effective February 18, 2014 as a public limited company. It was established for the purpose of facilitating the business combination between EHSI. and Paladin. On February 28, 2014 we became the successor registrant of EHSI and Paladin in connection with the consummation of certain transactions. In addition, on February 28, 2014, the shares of Endo International plc began trading on the NASDAQ under the symbol "ENDP," the same symbol under which Endo Health Solutions Inc.’s shares previously traded, as well as on the Toronto Stock Exchange under the symbol "ENL". References throughout to "ordinary shares" refer to EHSI’s common shares, 350,000,000 authorized, par value $0.01 per share, prior to the consummation of the transactions and to Endo International plc's ordinary shares, 1,000,000,000 authorized, par value $0.0001 per share, subsequent to the consummation of the transactions. In addition, on February 11, 2014 the Company issued 4,000,000 euro deferred shares of $0.01 each at par.

Share-Based Compensation

As further discussed in Note 3. Discontinued Operations, the operating results of the Company's HealthTronics business are reported as Discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for all periods presented.

All share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense in the income statement over the requisite service period.

The Company recognized share-based compensation expense of $7.6 million and $15.3 million during the three months ended March 31, 2014 and 2013, respectively. As of March 31, 2014, the total remaining unrecognized compensation cost related to all non-vested share-based compensation awards amounted to $79.5 million.

Options

During the three months ended March 31, 2014 and 2013, the Company granted options to employees of the Company as part of their annual stock compensation award and, in certain circumstances, upon their commencement of service with the Company. For all of the Company’s share-based compensation plans, the fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model.

A summary of the activity under the Endo 2000, 2004, 2007, and 2010 Stock Incentive Plans and the Endo Assumed Stock Incentive Plan for the three months ended March 31, 2014 is presented below:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of January 1, 2014	4,245,789		$	29.30
Granted	487,521		$	79.58
Exercised	(771,960	)	$	27.97
Forfeited	(221,049	)	$	32.28
Expired	(14,288	)	$	24.53
Outstanding as of March 31, 2014	3,726,013		$	35.99	5.67	$	124,242,124
Vested and expected to vest as of March 31, 2014	3,515,383		$	35.20	5.60	$	119,462,871
Exercisable as of March 31, 2014	2,025,802		$	27.19	4.57	$	82,254,814

The total intrinsic value of options exercised during the three months ended March 31, 2014 and 2013 was $21.6 million and $12.8 million, respectively. The weighted average grant date fair value of the options granted in the three months ended March 31, 2014 and 2013 was $21.31 and $9.33 per option, respectively, determined using the following assumptions:

	March 31, 2014		March 31, 2013
Average expected term (years)	4.0		5.0
Risk-free interest rate	1.1	%	0.8	%
Dividend yield	—		—
Expected volatility	32	%	33	%

As of March 31, 2014, the weighted average remaining requisite service period of the non-vested options was 2.2 years. As of March 31, 2014, the total remaining unrecognized compensation cost related to non-vested options amounted to $16.0 million.

Restricted Stock Units

During the three months ended March 31, 2014 and 2013, the Company granted restricted stock units to employees and non-employee directors of the Company as part of their annual stock compensation award and, in certain circumstances, upon their commencement of service with the Company.

A summary of our restricted stock units for the three months ended March 31, 2014 is presented below:

	Number of Shares		Aggregate Intrinsic Value
Outstanding as of January 1, 2014	2,262,428
Granted	470,386
Forfeited	(130,793	)
Vested	(754,289	)
Outstanding as of March 31, 2014	1,847,732		$	125,257,752
Vested and expected to vest as of March 31, 2014	1,571,091		$	101,097,755

As of March 31, 2014, the weighted average remaining requisite service period of the non-vested restricted stock units was 2.5 years. The weighted average grant date fair value of the restricted stock units granted during the three months ended March 31, 2014 and 2013 was $83.09 and $29.53 per unit, respectively. As of March 31, 2014, the total remaining unrecognized compensation cost related to non-vested restricted stock units amounted to $45.0 million.

Restricted Stock Awards

A summary of our restricted stock awards for the three months ended March 31, 2014 is presented below:

	Number of Shares		Weighted Average Fair Value Per Share		Aggregate Intrinsic Value
Non-vested as of January 1, 2014	27,492		$	33.91
Granted	—		$	—
Forfeited	(1,507	)	$	35.89
Vested	(5,872	)	$	33.60	$	403,113
Non-vested as of March 31, 2014	20,113		$	33.85

As of March 31, 2014, the weighted average remaining requisite service period of the non-vested restricted stock awards was approximately 0.7 year.

Performance Shares

The Company grants performance stock units (PSU) to certain key employees as part of their annual stock compensation award or as part of a sign-on equity award. For grants prior to 2013, PSUs are tied to both the Company’s overall revenue and its total shareholder return (TSR) relative to the total shareholder return of a selected industry group. PSUs granted since January 1, 2013 are only tied to TSR, either on an absolute basis or relative to the TSR of a selected industry group. PSUs granted during the three months ended March 31, 2014 and 2013 totaled approximately 111,130 and 336,330, respectively. As of March 31, 2014, there was approximately $18.4 million of total unrecognized compensation cost related to PSUs. That cost is expected to be recognized over a weighted average period of 3.0 years.

Employee Stock Purchase Plan

Compensation expense during the three months ended March 31, 2014 and 2013 related to the Employee Stock Purchase Plan (ESPP) totaled $0.2 million and $0.6 million, respectively. The Company issued 19,402 shares with a cost totaling $1.2 million during the three months ended March 31, 2014 pursuant to the ESPP and 69,846 shares with a cost totaling $1.6 million during the three months ended March 31, 2013.

Changes in Shareholders' Equity

The following table displays a reconciliation of our beginning and ending balances in shareholders' equity for the three months ended March 31, 2014 (dollars in thousands):

	Attributable to:
	Endo International plc			Noncontrolling interests			Total Shareholders’ Equity
Shareholders’ equity at January 1, 2014	$	526,018		$	59,198		$	585,216
Net (loss) income	(436,912		)	3,634			(433,278		)
Other comprehensive income	4,737			—			4,737
Compensation related to share-based awards	7,595			—			7,595
Tax withholding for restricted shares	(21,475		)	—			(21,475		)
Exercise of options	21,593			—			21,593
Distributions to noncontrolling interests	—			(4,963		)	(4,963		)
Buy-out of noncontrolling interests, net of contributions	—			(82		)	(82		)
Addition of Paladin noncontrolling interests due to acquisition	—			69,600			69,600
Removal of HealthTronics, Inc. noncontrolling interests due to disposition	—			(57,359		)	(57,359		)
Ordinary shares issued in connection with the Paladin acquisition	2,844,279			—			2,844,279
Other	21,500			—			21,500
Shareholders’ equity at March 31, 2014	$	2,967,335		$	70,028		$	3,037,363

As part of the reorganization upon consummation of the Paladin acquisition, EHSI Common stock and Treasury stock in the amounts of $1.5 million and $763.1 million were retired and reclassified into Additional paid-in capital.

The following table displays a reconciliation of our beginning and ending balances in shareholders' equity for the three months ended March 31, 2013 (dollars in thousands):

	Attributable to:
	Endo International plc			Noncontrolling interests			Total Shareholders’ Equity
Shareholders’ equity at January 1, 2013	$	1,072,856		$	60,350		$	1,133,206
Net income	15,349			11,254			26,603
Other comprehensive loss	(2,364		)	—			(2,364		)
Compensation related to share-based awards	15,331			—			15,331
Tax withholding for restricted shares	—			—			—
Exercise of options	12,826			—			12,826
Ordinary shares issued from treasury, net of ordinary shares purchased	1,557			—			1,557
Distributions to noncontrolling interests	—			(12,832		)	(12,832		)
Buy-out of noncontrolling interests, net of contributions	—			(1,406		)	(1,406		)
Other	(1,184		)	—			(1,184		)
Shareholders’ equity at March 31, 2013	$	1,114,371		$	57,366		$	1,171,737