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 September 30,				For The Nine Months Ended September 30,
(in thousands, except per share amounts)	2014		2013		2014		2013
Net income	$	21,171	$	20,839	$	47,546	$	50,906
Less: (a) Distributed earnings to common shareholders	8,244		7,836		23,944		21,527
Distributed earnings to participating securities	48		48		133		123
Undistributed earnings	12,879		12,955		23,469		29,256

(b) Undistributed earnings allocated to common shareholders	12,805		12,877		23,340		29,089
Undistributed earnings allocated to participating securities	74		78		129		167

Total income available to common shareholders, basic (a)+(b)	$	21,049	$	20,713	$	47,284	$	50,616

Weighted average Common Shares outstanding, basic	38,704		38,696		38,744		38,613

Basic earnings per Common Share	$	0.54	$	0.54	$	1.22	$	1.31

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 and restricted stock units granted under Registrant’s 2000 and 2008 Stock Incentive Plans and the 2003 Non-Employee Directors Plan, and net income. At September 30, 2014 and 2013, there were 235,584 and 273,740 options outstanding, respectively, under these Plans. At September 30, 2014 and 2013, there were also 224,543 and 236,891 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 September 30,				For The Nine Months Ended September 30,
(in thousands, except per share amounts)	2014		2013		2014		2013
Common shareholders earnings, basic	$	21,049	$	20,713	$	47,284	$	50,616
Undistributed earnings for dilutive stock options	74		78		129		167
Total common shareholders earnings, diluted	$	21,123	$	20,791	$	47,413	$	50,783

Weighted average common shares outstanding, basic	38,704		38,696		38,744		38,613
Stock-based compensation (1)	226		227		219		222
Weighted average common shares outstanding, diluted	38,930		38,923		38,963		38,835

Diluted earnings per Common Share	$	0.54	$	0.53	$	1.22	$	1.31

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 235,584 and 273,740 stock options at September 30, 2014 and 2013, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 224,543 and 236,891 restricted stock units at September 30, 2014 and 2013, respectively, were included in the calculation of diluted EPS for the nine months ended September 30, 2014 and 2013.

No stock options outstanding at September 30, 2014 had an exercise price greater than the average market price of AWR’s Common Shares for the nine months ended September 30, 2014. There were no stock options outstanding at September 30, 2014 or 2013 that were anti-dilutive.

During the nine months ended September 30, 2014 and 2013, Registrant issued 95,331 and 236,528 common shares, for approximately $370,000 and $1,948,000, 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 566,258 and 553,067 Common Shares on the open market during the nine months ended September 30, 2014 and 2013, respectively, under Registrant’s 401(k) Plan and the DRP.

On March 27, 2014, AWR's Board of Directors approved a stock repurchase program, authorizing AWR to repurchase up to 1.25 million shares of its Common Shares from time to time through June 30, 2016. Pursuant to this program, Registrant repurchased 231,298 Common Shares on the open market during the nine months ended September 30, 2014.

During the three months ended September 30, 2014 and 2013, AWR paid quarterly dividends of approximately $8.2 million, or $0.213 per share, and $7.8 million, or $0.2025 per share, respectively. During the nine months ended September 30, 2014 and 2013 AWR paid quarterly dividends to shareholders of approximately $23.9 million, or $0.6180 per share, and $21.5 million, or $0.5575 per share, respectively.

On October 28, 2014, AWR's Board of Directors approved a fourth quarter dividend of $0.2130 per share on the Common Shares of AWR. Dividends on the Common Shares will be payable on December 1, 2014 to shareholders of record at the close of business on November 14, 2014.