Earnings per Share/Capital Stock:

In accordance with the accounting guidance for participating securities and earnings per share (“EPS”), Registrant uses the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determines EPS for each class of common stock and participating security. AWR has participating securities related to its stock-based awards that earn dividend equivalents on an equal basis with AWR’s Common Shares (the “Common Shares”). In applying the “two-class” method, undistributed earnings are allocated to both common shares and participating securities.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding for calculating basic net income per share:



Basic:		For The Three Months Ended June 30,				For The Six Months Ended June 30,
(in thousands, except per share amounts)		2013		2012		2013		2012
Net income		$	16,602	15,078		30,067		25,193
Less: (a)	Distributed earnings to common shareholders	6,854		5,287		13,693		10,560
	Distributed earnings to participating securities	95		38		181		68
Undistributed earnings		9,653		9,753		16,193		14,565

(b)	Undistributed earnings allocated to common shareholders	9,522		9,683		15,982		14,472
	Undistributed earnings allocated to participating securities	131		70		211		93

Total income available to common shareholders, basic (a)+(b)		$	16,376	$	14,970	$	29,675	$	25,032

Weighted average Common Shares outstanding, basic		19,306		18,882		19,285		18,857
Basic earnings per Common Share		$	0.85	$	0.79	$	1.54	$	1.33

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with stock options granted under Registrant’s 2000 and 2008 Employee Plans, and the 2003 Directors Plan, and net income. At June 30, 2013 and 2012, there were 140,834 and 519,273 options outstanding, respectively, under these Plans. At June 30, 2013 and 2012, there were also 130,453 and 147,109 restricted stock units outstanding, respectively.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding for calculating diluted net income per share:



Diluted:	For The Three Months Ended June 30,				For The Six Months Ended June 30,
(in thousands, except per share amounts)	2013		2012		2013		2012
Common shareholders earnings, basic	$	16,376	$	14,970	$	29,675	$	25,032
Undistributed earnings for dilutive stock options	—		—		—		93
Total common shareholders earnings, diluted	$	16,376	$	14,970	$	29,675	$	25,125

Weighted average common shares outstanding, basic	19,306		18,882		19,285		18,857
Stock-based compensation (1)	40		63		39		131
Weighted average common shares outstanding, diluted	19,346		18,945		19,324		18,988

Diluted earnings per Common Share	$	0.85	$	0.79	$	1.54	$	1.32

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 140,834 and 410,760 stock options at June 30, 2013 and 2012, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 130,453 and 147,109 restricted stock units at June 30, 2013 and 2012, respectively, were included in the calculation of diluted EPS for the six months ended June 30, 2013 and 2012.

No stock options outstanding as of June 30, 2013 had an exercise price greater than the average market price of AWR’s Common Shares for the six months ended June 30, 2013. As of June 30, 2012, 108,013 stock options were outstanding but not included in the computation of diluted EPS because the related option exercise price was greater than the average market price of AWR’s Common Shares for the three months ended June 30, 2012. There were 500 stock options outstanding at June 30, 2012, but not included in the computation of diluted EPS because they were anti-dilutive. There were no stock options outstanding at June 30, 2013 that were anti-dilutive.

During the six months ended June 30, 2013 and 2012, Registrant issued 104,493 and 131,581 Common Shares, for approximately $1,832,000 and $2,748,000, respectively, under Registrant’s Common Share Purchase and Dividend Reinvestment Plan (“DRP”), the 401(k) Plan, the 2000 and 2008 Employee Plans, and the 2003 Directors Plan. In addition, Registrant purchased 240,612 and 408,962 Common Shares on the open market during the six months ended June 30, 2013 and 2012, respectively, under Registrant’s 401(k) Plan and the DRP. The Common Shares purchased by Registrant were used to satisfy the requirements of these plans.

During the three months ended June 30, 2013 and 2012, AWR paid quarterly dividends of approximately $6.8 million, or $0.355 per share, and $5.3 million, or $0.28 per share, respectively. During the six months ended June 30, 2013 and 2012, AWR paid quarterly dividends to shareholders of approximately $13.7 million, or $0.71 per share, and $10.6 million, or $0.56 per share, respectively.

On May 20, 2013, AWR's Board of Directors approved its third quarter cash dividend of $0.405 per share on the common shares of the Company. Dividends on the common shares will be payable on September 3, 2013 to shareholders of record at the close of business on August 15, 2013. The September 3, 2013 dividend will be applied to the shares prior to the stock split discussed below.

On May 20, 2013, AWR's Board of Directors also approved a two-for-one stock split of the Company's common shares. On or about September 3, 2013, shareholders will receive one additional share for each AWR common share they own. Common shares issued and outstanding at June 30, 2013 and December 31, 2012 were 19.3 million and 19.2 million, respectively. Given retroactive effect to the stock split, common shares issued and outstanding at June 30, 2013 and December 31, 2012, would have been approximately 38.7 million and 38.5 million, respectively. Pro forma per share data for the three and six months ended June 30, 2013 on a post-split basis are presented below:



Earnings per share	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012		2013		2012
As reported:
Basic weighted average shares outstanding (in 000's)	19,306		18,882		19,285		18,857
Basic earnings per share	$	0.85	$	0.79	$	1.54	$	1.33

Diluted weighted average shares outstanding (in 000's)	19,346		18,945		19,324		18,988
Diluted earnings per share	$	0.85	$	0.79	$	1.54	$	1.32

Pro forma two-for-one split adjusted:
Basic weighted average shares outstanding (in 000's)	38,612		37,764		38,570		37,714
Basic earnings per share	$	0.425	$	0.395	$	0.770	$	0.665

Diluted weighted average shares outstanding (in 000's)	38,692		37,890		38,648		37,976
Diluted earnings per share	$	0.425	$	0.395	$	0.770	$	0.660