Stock Incentive Plans

12 Months Ended

Dec. 31, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock incentive plans

STOCK INCENTIVE PLANS

Under the Company's 1993 Stock Incentive Plan (“1993 Plan”), the Company granted options to purchase shares of the Company's common stock at the fair market value on the date of grant. The options vest over periods up to three years and have a term of ten years from date of grant. As of December 31, 2003, there were no options available for future grants under the 1993 Plan. The 1993 Plan expired at the end of 2003 and was replaced by the Company's 2004 Stock Incentive Plan, which was amended at the Company's 2009 Annual Stockholders Meeting, among other things, to increase the number of shares available for issuance under the Plan. Under the BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan (“2004 Stock Incentive Plan”), 12.5 million shares are authorized for grant, of which approximately 2.2 million shares are available for future issuance.

Stock Options The Company recognized no stock compensation expense and negligible stock option compensation expense during the years ended December 31, 2011 and 2010, respectively. During the year ended December 31, 2009, the Company's stock option compensation expense reduced earnings before income and noncontrolling interest by $6.6 million, net earnings by $5.1 million and basic and diluted earnings per share by $0.04, respectively.

A summary of the plans’ shares under option at December 31, 2011, 2010 and 2009 is as follows:

	Shares (thousands)		Weighted average exercise price		Weighted average remaining contractual life (in years)	Aggregate intrinsic value (in millions)
Outstanding at January 1, 2009	5,798		$	27.86	6.7	$	6.0
Exercised	(381	)	$	23.89		$	3.4
Forfeited	(240	)	$	32.16
Outstanding at December 31, 2009	5,177		$	27.98	5.8	$	29.7
Exercised	(1,888	)	$	26.73		$	50.3
Forfeited	(36	)	$	33.95
Outstanding at December 31, 2010	3,253		$	28.64	4.9	$	142.2
Exercised	(1,033	)	$	27.15		$	48.4
Outstanding at December 31, 2011	2,220		$	29.36	4.1	$	76.3
Options exercisable at December 31, 2011	2,220		$	29.36	4.1	$	76.3

The following table summarizes information about the stock options outstanding and exercisable at December 31, 2011:

	Options outstanding and exercisable
Range of Exercise Prices	Number outstanding and exercisable (thousands)	Weighted average remaining contractual life (years)	Weighted average exercise price
$12.07 - $16.52	155	1.1	$	14.55
$22.15 - $34.95	2,065	4.3	$	30.46
	2,220	4.1	$	29.36

Proceeds from stock option exercises for the years ended December 31, 2011, 2010 and 2009 were as follows:

	Year Ended December 31,
(millions of dollars)	2011		2010		2009
Proceeds from stock options exercised — gross	$	28.6	$	55.4	$	9.4
Tax benefit (loss)	24.4		11.7		(0.7		)
Proceeds from stock options exercised, net of tax	$	53.0	$	67.1	$	8.7

Restricted Stock At its November 2007 meeting, the Company's Compensation Committee decided that restricted common stock awards and stock units ("restricted stock") would be awarded in place of stock options for long-term incentive award grants to employees. Restricted stock granted to employees vest 50% after two years and the remainder after three years from the date of grant. Restricted stock granted to non-employee directors generally vests on the anniversary date of the grant.

The value of restricted stock is determined by the market value of the Company's common stock at the date of grant. In February 2011, restricted stock in the amount of 270,144 was granted to employees under the 2004 Stock Incentive Plan. In April 2011, restricted stock in the amount of 3,288 was granted to non-employee directors under the 2004 Stock Incentive Plan. The value of the awards is recorded as unearned compensation within capital in excess of par value in equity and is amortized as compensation expense over the restriction periods.

Restricted stock compensation expense reduced earnings before income taxes and noncontrolling interest, net earnings and earnings per share for the years ended December 31, 2011, 2010 and 2009 by:

	Year Ended December 31,
(millions of dollars, except per share data)	2011		2010		2009
Earnings before income taxes and noncontrolling interest	$	15.1	$	18.9	$	14.8
Net earnings	$	11.4	$	14.7	$	11.4
Earnings per share — basic	$	0.10	$	0.13	$	0.10
Earnings per share — diluted	$	0.09	$	0.11	$	0.10

A summary of the status of the Company’s nonvested restricted stock for employees and non-employee directors at December 31, 2011, 2010 and 2009 is as follows:

	Shares subject to restriction (thousands)		Weighted average price
Nonvested at January 1, 2009	662		$	45.29
Granted	1,044		$	20.61
Vested	(24	)	$	51.03
Forfeited	(135	)	$	29.79
Nonvested at December 31, 2009	1,547		$	29.90
Granted	603		$	36.16
Vested	(188	)	$	44.80
Forfeited	(91	)	$	27.10
Nonvested at December 31, 2010	1,871		$	30.55
Granted	274		$	70.57
Vested	(609	)	$	27.39
Forfeited	(106	)	$	38.05
Nonvested at December 31, 2011	1,430		$	39.02

Performance Share Plans The 2004 Stock Incentive Plan provides for awarding of performance shares to members of senior management at the end of successive three-year periods based on the Company's performance in terms of total shareholder return relative to a peer group of automotive companies. Awards earned are generally payable 40% in cash and 60% in the Company's common stock.

The Company recognizes compensation expense for the 40% cash component and 60% stock component ratably over the performance period. Compensation expense for the 60% stock component is based on the performance shares fair value at the date of grant. This fair value is calculated using a lattice model (Monte Carlo simulation). The compensation expense for the 40% cash component is based on quarterly marking to market the cash liability. The amounts expensed under the plan and the share issuances for the three-year measurement periods ended December 31, 2011, 2010 and 2009 were as follows:

	Year Ended December 31,
(millions of dollars, except share data)	2011		2010		2009
Expense	$	26.3	$	23.9	$	10.7
Number of shares*	538,180		104,205		269,896

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*Shares are issued in February of the following year.