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 restricted stock units that earn dividend equivalents on an equal basis with AWR’s Common Shares that have been issued under AWR's 2000 and 2008 Stock Incentive Plans and the 2003 and 2013 Non-Employee Directors Stock Plans. 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 June 30,				For The Six Months Ended June 30,
(in thousands, except per share amounts)	2015		2014		2015		2014
Net income	$	15,648	$	15,354	27,797		26,375
Less: (a) Distributed earnings to common shareholders	8,016		7,853		16,171		15,699
Distributed earnings to participating securities	47		47		89		87
Undistributed earnings	7,585		7,454		11,537		10,589

(b) Undistributed earnings allocated to common shareholders	7,541		7,411		11,474		10,530
Undistributed earnings allocated to participating securities	44		43		63		59

Total income available to common shareholders, basic (a)+(b)	$	15,557	$	15,264	$	27,645	$	26,229

Weighted average Common Shares outstanding, basic	37,702		38,781		37,952		38,764

Basic earnings per Common Share	$	0.41	$	0.39	$	0.73	$	0.68

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 AWR’s 2000 and 2008 Stock Incentive Plans, and the 2003 and 2013 Non-Employee Directors Stock Plans, and net income. At June 30, 2015 and 2014, there were 187,152 and 245,784 options outstanding, respectively, under these Plans. At June 30, 2015 and 2014, there were also 225,074 and 239,226 restricted stock units outstanding, respectively, including performance shares awarded to officers of the Registrant.

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)	2015		2014		2015		2014
Common shareholders earnings, basic	$	15,557	$	15,264	$	27,645	$	26,229
Undistributed earnings for dilutive stock-based awards	44		43		63		59
Total common shareholders earnings, diluted	$	15,601	$	15,307	$	27,708	$	26,288

Weighted average common shares outstanding, basic	37,702		38,781		37,952		38,764
Stock-based compensation (1)	207		220		201		210
Weighted average common shares outstanding, diluted	37,909		39,001		38,153		38,974

Diluted earnings per Common Share	$	0.41	$	0.39	$	0.73	$	0.67

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 187,152 and 245,784 stock options at June 30, 2015 and 2014, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 225,074 and 239,226 restricted stock units at June 30, 2015 and 2014, respectively, were included in the calculation of diluted EPS for the six months ended June 30, 2015 and 2014.

No stock options outstanding at June 30, 2015 had an exercise price greater than the average market price of AWR’s Common Shares for the six months ended June 30, 2015. There were no stock options outstanding at June 30, 2015 or 2014 that were anti-dilutive.

During the six months ended June 30, 2015 and 2014, AWR issued 69,617 and 70,573 common shares, for approximately $512,000 and $219,000, 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.

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 704,782 Common Shares on the open market during the six months ended June 30, 2015. The 2014 stock repurchase program was completed in May 2015. On May 19, 2015, AWR's Board of Directors approved a new stock repurchase program, authorizing AWR to repurchase up to 1.2 million shares of its Common Shares from time to time through June 30, 2017. Pursuant to this program, Registrant repurchased 387,021 Common Shares on the open market during the six months ended June 30, 2015. The repurchase of Common Shares is restricted by California law under the same standards which apply to dividend distributions.

During the three months ended June 30, 2015 and 2014, AWR paid quarterly dividends of approximately $8.0 million, or $0.213 per share, and $7.9 million, or $0.2025 per share, respectively. During the six months ended June 30, 2015 and 2014, AWR paid quarterly dividends to shareholders of approximately $16.2 million, or $0.426 per share, and $15.7 million, or $0.405 per share, respectively.