Earnings Per Share

9 Months Ended

Sep. 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. The Company settled the majority of the warrants included in the bond hedge overlay, delivering approximately 4.4 million shares of its common stock held in treasury during the third quarter of 2012. Prior to settlement, if the Company's weighted-average share price exceeded $38.61 per share, the warrants were 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 September 30,				Nine Months Ended September 30,
(in millions, except per share amounts)	2012		2011		2012		2011
Basic earnings per share:
Net earnings attributable to BorgWarner Inc.	$	101.1	$	141.6	$	379.7	$	428.1
Weighted average shares of common stock outstanding	114.299		108.779		111.619		109.391
Basic earnings per share of common stock	$	0.88	$	1.30	$	3.40	$	3.91
Diluted earnings per share:
Net earnings attributable to BorgWarner Inc.	$	101.1	$	141.6	$	379.7	$	428.1
Adjustment for net interest expense on convertible notes	—		5.4		5.8		16.0
Diluted net earnings attributable to BorgWarner Inc.	$	101.1	$	147.0	$	385.5	$	444.1
Weighted average shares of common stock outstanding	114.299		108.779		111.619		109.391
Effect of 3.50% convertible senior notes	—		11.389		4.429		11.389
Effect of warrant	2.208		5.158		4.507		5.332
Effect of stock-based compensation	1.992		2.614		2.016		2.657
Total dilutive effect on weighted average shares of common stock outstanding	4.200		19.161		10.952		19.378
Weighted average shares of common stock outstanding including dilutive shares	118.499		127.940		122.571		128.769
Diluted earnings per share of common stock	$	0.85	$	1.15	$	3.15	$	3.45
Total anti-dilutive shares:
Call options	—		6.092		2.586		6.240