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 used for calculating basic net income per share:



Basic:		For The Three Months Ended March 31,
(in thousands, except per share amounts)		2014		2013
Net income		$	11,021	13,465
Less: (a)	Distributed earnings to common shareholders	7,846		6,839
	Distributed earnings to participating securities	43		45
Undistributed earnings		3,132		6,581

(b)	Undistributed earnings allocated to common shareholders	3,114		6,539
	Undistributed earnings allocated to participating securities	18		42

Total income available to common shareholders, basic (a)+(b)		$	10,960	$	13,378

Weighted average Common Shares outstanding, basic		38,747		38,529
Basic earnings per Common Share		$	0.28	$	0.35

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 Stock Incentive Plans, the 2003 Non-Employee Directors Plan, and net income. At March 31, 2014 and 2013, there were 247,064 and 352,096 options outstanding, respectively, under these Plans. At March 31, 2014 and 2013, there were also 237,174 and 290,416 restricted stock units outstanding, respectively, under these plans and the 2013 Non-Employee Directors Plan.

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 March 31,
(in thousands, except per share amounts)	2014		2013
Common shareholders earnings, basic	$	10,960	$	13,378
Undistributed earnings for dilutive stock options	18		42
Total common shareholders earnings, diluted	$	10,978	$	13,420

Weighted average Common Shares outstanding, basic	38,747		38,529
Stock-based compensation (1)	197		243
Weighted average Common Shares outstanding, diluted	38,944		38,772

Diluted earnings per Common Share	$	0.28	$	0.35

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 247,064 stock options and 352,096 restricted stock units at March 31, 2014 and 2013, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 237,174 and 290,416 restricted stock units at March 31, 2014 and 2013, respectively, were included in the calculation of diluted EPS for the three months ended March 31, 2014 and 2013.

No stock options outstanding at March 31, 2014 had an exercise price greater than the average market price of AWR’s Common Shares for the three months ended March 31, 2014. There were no stock options outstanding at March 31, 2014 or 2013 that were anti-dilutive.

During the three months ended March 31, 2014 and 2013, Registrant issued 57,249 and 92,586 Common Shares, for approximately $201,000 and $625,000, respectively, under Registrant’s common share Purchase and Dividend Reinvestment Plan (“DRP”), the 401(k) Plan, the 2000 and 2008 Stock Incentive Plans, and the 2003 and 2013 Non-Employee Directors Stock Plans. In addition, Registrant purchased 159,754 and 85,194 Common Shares on the open market during the three months ended March 31, 2014 and 2013, 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 March 31, 2014 and 2013, AWR paid quarterly dividends of approximately $7.8 million, or $0.2025 per share, and $6.8 million, or $0.1775 per share, respectively.

On March 27, 2014, AWR's Board of Directors approved a stock repurchase program, authorizing the Company to repurchase up to 1.25 million shares of the Company's Common Shares from time to time through June 30, 2016. During the three months ended March 31, 2014, there were no repurchases made under this program.