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 March 31,
(in thousands, except per share amounts)	2016		2015
Net income	$	10,150	$	12,149
Less: (a) Distributed earnings to common shareholders	8,181		8,138
Distributed earnings to participating securities	45		45
Undistributed earnings	1,924		3,966

(b) Undistributed earnings allocated to common shareholders	1,914		3,945
Undistributed earnings allocated to participating securities	10		21

Total income available to common shareholders, basic (a)+(b)	$	10,095	$	12,083

Weighted average Common Shares outstanding, basic	36,521		38,205

Basic earnings per Common Share	$	0.28	$	0.32

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 March 31, 2016 and 2015, there were 142,402 and 198,764 options outstanding, respectively, under these Plans. At March 31, 2016 and 2015, there were also 215,129 and 226,319 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 March 31,
(in thousands, except per share amounts)	2016		2015
Common shareholders earnings, basic	$	10,095	$	12,083
Undistributed earnings for dilutive stock-based awards	10		21
Total common shareholders earnings, diluted	$	10,105	$	12,104

Weighted average common shares outstanding, basic	36,521		38,205
Stock-based compensation (1)	176		203
Weighted average common shares outstanding, diluted	36,697		38,408

Diluted earnings per Common Share	$	0.28	$	0.32

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 142,402 and 198,764 stock options at March 31, 2016 and 2015, respectively, were deemed to be outstanding in accordance with the accounting guidance on earnings per share. All of the 215,129 and 226,319 restricted stock units at March 31, 2016 and 2015, respectively, were included in the calculation of diluted EPS for the three months ended March 31, 2016 and 2015.

No stock options outstanding at March 31, 2016 had an exercise price greater than the average market price of AWR’s Common Shares for the three months ended March 31, 2016. There were no stock options outstanding at March 31, 2016 or 2015 that were anti-dilutive.

During the three months ended March 31, 2016 and 2015, AWR issued 52,153 and 47,422 common shares for approximately $126,000 and $292,000, respectively, under Registrant’s Common Share Purchase and Dividend Reinvestment Plan, 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 356,769 Common Shares on the open market during the three months ended March 31, 2015. This stock repurchase program was completed in 2015.

During the three months ended March 31, 2016 and 2015, AWR paid quarterly dividends of approximately $8.2 million, or $0.224 per share, and $8.2 million, or $0.213 per share, respectively.