Earnings Per Share

3 Months Ended

Mar. 31, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The Company presents both basic and diluted earnings per share of common stock (“EPS”) amounts. Basic EPS is calculated by dividing net earnings attributable to BorgWarner Inc. by the weighted average shares of common stock outstanding during the reporting period. Diluted EPS is calculated by dividing net earnings attributable to BorgWarner Inc. by the weighted average shares of common stock and common equivalent stock outstanding during the reporting period.

The dilutive impact of stock-based compensation is calculated using the treasury stock method. The treasury stock method assumes that the Company uses the proceeds from the exercise of awards to repurchase common stock at the average market price during the period. The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future, compensation cost for future service that the Company has not yet recognized and any windfall/(shortfall) tax benefits that would be credited/(debited) to capital in excess of par value when the award generates a tax deduction. Options are only dilutive when the average market price of the underlying common stock exceeds the exercise price of the options.

The potential common shares associated with the Company's 3.50% convertible senior notes due April 15, 2012, which were settled in April 2012, are reflected in diluted EPS using the “if-converted” method. Under this method, if dilutive, the common stock is assumed issued as of the beginning of the reporting period and included in calculating diluted EPS. In addition, if dilutive, interest expense, net of tax, related to the convertible notes is added back to the numerator in calculating diluted EPS.

Separately and concurrently with the issuance of the Company's 3.50% convertible senior notes, the Company entered into a bond hedge overlay, including warrants and call options. If the Company's weighted-average share price exceeds $38.61 per share, the warrants will be dilutive to the Company's earnings. If the Company's weighted average share price exceeds $32.82 per share, the offsetting bond hedge will be anti-dilutive.

The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share of common stock:

	Three Months Ended March 31,
(in millions, except per share amounts)	2012		2011
Basic earnings per share:
Net earnings attributable to BorgWarner Inc.	$	158.0	$	124.5
Weighted average shares of common stock outstanding	108.420		110.634
Basic earnings per share of common stock	$	1.46	$	1.13
Diluted earnings per share:
Net earnings attributable to BorgWarner Inc.	$	158.0	$	124.5
Adjustment for net interest expense on convertible notes	5.0		5.2
Diluted net earnings attributable to BorgWarner Inc.	$	163.0	$	129.7
Weighted average shares of common stock outstanding	108.420		110.634
Effect of 3.50% convertible senior notes	11.389		11.389
Effect of warrant	5.813		5.416
Effect of stock-based compensation	2.120		2.785
Total dilutive effect on weighted average shares of common stock outstanding	19.322		19.590
Weighted average shares of common stock outstanding including dilutive shares	127.742		130.224
Diluted earnings per share of common stock	$	1.28	$	1.00
Total anti-dilutive shares:
Call options	6.650		6.312