Earnings Per Share

6 Months Ended

Jun. 30, 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 assumed 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.

In April 2012, the Company settled its 3.50% convertible senior notes. Prior to the settlement, the potential common shares associated with these notes were reflected in diluted EPS using the “if-converted” method. Under this method, if dilutive, the common shares were 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 senior notes was added back to the numerator in calculating diluted EPS.

In conjunction with the convertible senior note offering, the Company entered into a bond hedge overlay, including both call options and warrants. On April 16, 2012, the Company settled the call option portion of bond hedge overlay, receiving approximately 6.5 million shares, which reduced the weighted average basic and dilutive shares outstanding. Prior to the settlement, if the Company's weighted average share price exceeded $32.82 per share, the call options were anti-dilutive. Subsequent to the Balance Sheet date, on July 13, 2012, the Company settled half of the outstanding warrants included in the bond hedge overlay, delivering approximately 2.3 million shares of its common stock held in treasury. The remaining warrants are scheduled to mature through October 9, 2012. If the Company's weighted-average share price exceeds $38.61 per share, the warrants are dilutive to the Company's earnings.

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share amounts)	2012		2011		2012		2011
Basic earnings per share:
Net earnings attributable to BorgWarner Inc.	$	120.6	$	162.0	$	278.6	$	286.5
Weighted average shares of common stock outstanding	112.139		108.761		110.280		109.697
Basic earnings per share of common stock	$	1.08	$	1.49	$	2.53	$	2.61
Diluted earnings per share:
Net earnings attributable to BorgWarner Inc.	$	120.6	$	162.0	$	278.6	$	286.5
Adjustment for net interest expense on convertible notes	0.8		5.4		5.8		10.6
Diluted net earnings attributable to BorgWarner Inc.	$	121.4	$	167.4	$	284.4	$	297.1
Weighted average shares of common stock outstanding	112.139		108.761		110.280		109.697
Effect of 3.50% convertible senior notes	1.898		11.389		6.644		11.389
Effect of warrant	5.499		5.421		5.656		5.419
Effect of stock-based compensation	1.937		2.571		2.028		2.678
Total dilutive effect on weighted average shares of common stock outstanding	9.334		19.381		14.328		19.486
Weighted average shares of common stock outstanding including dilutive shares	121.473		128.142		124.608		129.183
Diluted earnings per share of common stock	$	1.00	$	1.31	$	2.28	$	2.30
Total anti-dilutive shares:
Call options	1.108		6.317		3.879		6.314